Cartels, pension costs & saving teaching jobs

Cartels, pension costs & saving teaching jobs

Math is a precise discipline.
You add one plus one and you get two.
Educators — and the rest of us — have a nasty habit of twisting the answers to simple addition, subtraction, multiplication, and division problems to justify what we want.
Let’s demonstrate that point with a word problem. If Manteca Unified gets an increase of 16 percent in revenue, projected teacher pension costs go up 70 percent faster than projected teacher pay in the next three years, and other costs are rising as well such as electricity, books, and toilet paper, how much of a pay increase should teachers get?
If you are a member of a cartel — a term used in rudimentary college economic classes to describe a group acting in concert to set prices such as teacher bargaining groups who use salary surveys of what other teacher bargaining groups in other school districts get paid to dictate what they demand or want their district to pay them — you might say 16 percent. After all, if overall revenue to the district goes up 16 percent then everything should be increased proportionately by 16 percent.
But we are not talking total compensation. That terms applies to everything you are paid for your services including benefits as well as the promise of retirement benefits.
As things stand now, Manteca Unified salaries only for teachers will rise $8.1 million over the next three years. This does not include health insurance which has a nasty habit of going up beyond the rate of inflation. Meanwhile, pension payments from the district for those teachers will soar at least $13.9 million.
In reality that is a woefully inadequate increase in district pension payments. California Public Employees Retirement System (CalPERS) — one of two pension plans Manteca Unified teachers can opt for — has a $139 billion deficit with assets on hand to cover only 68 percent of their retirement obligations. CalPERS has seen its rate of return on investments linger at between 2 and 3 percent a year after making political decisions to divest of politically incorrect yet high performing stock such as tobacco firms. CalPERS’ house of cards is built on an annual return of 7.5 percent.
The district’s increased pension obligation is based on a CalPERS decision to reduce the projected return to 7 percent. No one can argue with a straight face that it shouldn’t have been pushed down lower. But even at 5 percent it wouldn’t prevent avoid the SS CalPERS ship from slamming into a hull slicing iceberg and start taking on water down the road.
The modest reduction in the rate of return will cost Manteca Unified $13.9 million over the next three years. There is also the small detail school districts by law must have balanced budgets three year out — something that is lost on the teacher cartel, parents, taxpayers, and administrators that cave into demands to spend and not worry about tomorrow.
Now for the dirty little secret. With Manteca Unified salary and benefits taking up almost 90 percent of the general fund budget that $13.9 million jump over the next three years will either have to eat into salaries or the ability to hire additional personnel.
Class size reduction requires a lot of teachers. Not only does it have to come out of that 16 percent increase the district gets from the state because we are not talking about money for new student growth, but so does the accompanying pension obligation that is growing 70 percent faster than anticipated salary costs over the next three years.
You will find few people if any who would argue that reducing the teacher to student ratio is not a desirable want. It is not, however, a need.
What is a need is for the district to stay financially solvent and honor its obligations to existing teachers and those that have retired to provide retirement benefits.
The school board can’t afford to provide raises that aren’t tempered by taking into account other rising hard costs the least of which are pension payments that essentially compensate the same teachers arguing for even larger raises.
To put that in perspective, every $1 a teacher is compensated currently the district pays 13.88 cents to CalPERS. That will increase to 21.6 cents per dollar by the 2019-2020 school year. The district’s three-year budget mandated by the state factors all of that in with projected raises over the next 36 months.
The bigger the raise, the more the pension costs are compounded.
A school board that is fiscally responsible to the community, to students, and to teachers understands this.
If Manteca Unified spends in the here and now on teacher salaries without taking into account increasing pension costs and other expenses they will set the stage for teacher layoffs or — at the very least — increased classroom sizes.
The school board needs to keep expenses and revenue in balance and risk the temptation to tap into one-time money to bump up salaries. If they don’t the only thing they will be able to cannibalize to avoid fiscal insolvency as pension costs mount is to eliminate teaching positions.
If that happens everyone loses — the community, the students and even teachers.