Retirement oversight in budget bill

Collective bargaining usually involves some give and take. Even in times of extreme financial pain, labor can find something to grasp, like… well, saving their jobs. Finding the good may be more challenging for teachers if California’s projected revenues aren’t met and the state imposes midyear budget cuts on schools.

Currently, districts can’t fall below 175 days of school in an academic year or they lose some state funding.

What AB 114, the state budget bill, means for the teacher retirement system. (click on image to enlarge)
What AB 114, the state budget bill, means for the teacher retirement system. (click on image to enlarge)

When lawmakers passed California’s new budget bill, AB 114, they created a one-time suspension of that limit of up to seven days if projected revenues fall $2 billion short and the state needs to make mid-year cuts to education.  Of course, the teachers’ union must agree to this reduction.

What the legislature failed to do in AB 114 is approve a concurrent fix to another section of the Education Code, which requires teachers to work 175 days in order to receive a full year service credit with CalSTRS, the California State Teachers’ Retirement System.


That’s a significant omission for teachers, explained Suzanne Speck with School Services of California, Inc. “I will tell you that teachers are just not going to agree to work a full year and not a get a full year service credit.”

While seven days may not seem like too many, the way that CalSTRS works it could put a teachers’ retirement plans into turmoil.  According to CalSTRS, there are three primary groups of teachers that would affected at various stages of their careers.

  • A member approaching her five-year vesting date could be delayed in reaching it due to potential service credit cuts. If she becomes disabled before her vesting date, she would not receive disability coverage under CalSTRS.
  • A member approaching the 25-year mark in her career, at which time she would be eligible for the one-year final compensation for the defined benefit pension, would be delayed in reaching that milestone.
  • A member approaching the 30-year mark in her career could be delayed in reaching it for the purposes of achieving the career factor, a 0.2 percent increase in the age factor calculation if a member retires with 30 years or more years of earned service credit up to the maximum age factor of 2.4 percent. [Example: if you are 61 years 3 months old at retirement without the career factor, your age factor is 2.167 percent. If you have the career factor (30-years or more) your age factor is 2.367 percent.]

That scenario puts local bargaining units in the position of pushing their districts closer to the financial abyss or accepting a reduction in school days. In the latter case, they’d be giving up both salary and service credits in CalSTRS.

“This is what happens when you pass bills in the middle of the night and don’t make phone calls and ask people, ‘If we do this, what are the consequences?'” said Speck,  referring to the legislature’s eleventh-hour vote on the state budget bill. “That’s just an assumption on my part; I’m trying to give the legislature credit that it was an unintended consequence.”

Teachers already gave at the office

While Speck wants to give lawmakers the benefit of the doubt, William Habermehl, Superintendent of the Orange County Office of Education, is too angry to be munificent.

“This the stupidest piece of legislation I’ve seen come out of Sacramento,” said Habermehl, suggesting that it was an easy way for lawmakers to put a balanced budget bill on the table so they could get paid.

He said with all that teachers have already agreed to, including furlough days, reduced medical benefits, and increased premiums, no cost-of-living increases, and larger class sizes, expecting them to approve shortening the school year is probably non-negotiable. So if the state does withhold up to seven days of school funding, districts will have to borrow, dip into reserves, or go bankrupt.

“When they called it a trigger they did the right thing,” said Habermehl, “because we have a gun to our head with this legislation.”

CTA supports AB 114 despite CalSTRS

In an odd twist, however, the California Teachers Association (CTA) is giving its full support to AB 114 because it prohibits teacher layoffs in August, which the union says is of more immediate concern.

In addition, says CTA spokesman Mike Myslinsksi, the situation is too hypothetical at this point. “We’re aware of this concern about service credits,” he said, “but this would only come into play if projected revenues do not materialize. That’s speculation; we believe the revenues will be sufficient.”

Try telling that to Superintendent Gary Thomas of the San Bernardino County Office of Education. He’s cautiously optimistic, as they say, but also realistic. “The economy right now has not been bouncing back. I don’t know whether or not we can count on these projections,” he said.

Thomas said the legislature can help by passing legislation to change the CalSTRS service credit law so it conforms to any changes in the instructional days in the school year.

Using the CalPERS law as an example for creating similar legislation for teachers. (Click on image to enlarge)
Using the CalPERS law as an example for creating similar legislation for teachers. (Click on image to enlarge)

CalSTRS officials say they’ve already written some language for a bill to address the discrepancy.  The legislature approved similar legislation last year for CalPERS, the state employee pension system. AB 1651 gives teachers aides, janitors, cafeteria workers and other classified school employees their full service credits if the school year is cut.

In order to provide similar protection for teachers, lawmakers will have to act on a CalSTRS bill as urgency legislation or it will be too late to help teachers before the next school year is over.

Author: Kathryn Baron

Kathryn Baron, co-writer of TOP-Ed (Thoughts On Public Education in California), has been covering education in California for about 15 years; most of that time at KQED Public Radio where her reports aired on The California Report as well as various National Public Radio programs. She also wrote for magazines and newspapers before going virtual as producer and editor at The George Lucas Educational Foundation. Kathy grew up in New York in a family of teachers. She moved to California for graduate school and after spending one sunny New Year’s Day riding her bicycle in the foothills, decided to stay. She and her husband live in Belmont. They have two children, one in college and one in high school.

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