Teacher pension liabilities driving up school costs, cutting take home pay

Rising teacher pension costs are complicating salary negotiations and weighing down higher budget forecasts from an improved state fiscal outlook. Contributions start a steep climb this year to offset the anticipated $70.4 billion future shortfall of the California State Teachers’ Retirement System.

Last year, school districts paid 8.9 percent of teacher salaries into CalSTRS. That rises to 10.7 percent this year and 12.6 percent for 2016-17, then stair-steps up to 19.1 percent in 2020-21, according to School Services of California, a financial consulting firm. Teacher contributions will be capped at 9.2 percent or 10.3 percent, depending on hire date.

Negotiations on salary increases must factor in the additional 1.9 percent districts will have to give and the 1 percent more teachers will lose to CalSTRS contributions.

CalSTRS paid out $11.4 billion in 2014. The average pension was $51,342 for kindergarten through high school teachers who had worked at least 15 years, according to the list of 2014 payees released by the nonprofit California Policy Center, available at TransparentCalifornia.com.

Career teachers can look forward to a far more generous retirement than workers in the Social Security system. Not only does CalSTRS give a higher rate, it also bases pensions on the highest-paid year for teachers on the job 25 years or more. That compares with benefits based on a 35-year average under Social Security.

Joel Knox, the chair of Merced/Mariposa Teachers UniServ Council, said teachers deserve the increased pay for pensions since the state owes CalSTRS.

“The state underfunded the CalSTRS account by a significant amount,” he said. “This is money due to school districts and to CalSTRS.”

To be sure, teachers do pay more out of each check while on the job. Social Security charges employers and workers 6.2 percent, up to a cap of $7,347 each. That compares with the 8.8 percent teachers paid, or $8,800 per $100,000, to CalSTRS in 2014, with no cap.

By 2021, that will rise to $10,300 paid by the teacher, and $19,100 by the school district, for every $100,000 a teacher makes.

Among the area’s top-earning retirees, Modesto City Schools Superintendent Arturo Flores, who earned $228,166 in 2009, now receives a pension of $202,800. Former Livingston Union Elementary School District Superintendent Henry Escobar made $238,855 in retirement for 2014.

Former Modesto Superintendent James Enochs, who retired with nearly 50 years on the books in 2007, tops the local list at $261,510 received in 2014, 16th highest in the state. For several years, Enochs was the highest-paid CalSTRS retiree, but for 2014 that designation goes to Orange County Superintendent of Schools William Habermehl, who received $347,856.

This story was originally published July 28, 2015 at 3:45 PM with the headline "Teacher pension liabilities driving up school costs, cutting take home pay."