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, still unresolved for this school year in Modesto and many other districts, must factor in the additional 1.9 percent districts will have to give and the 1 percent more teachers will lose to CalSTRS contributions.
State pension system unfunded liabilities: CalSTRS (teachers) $70 billion; CalPERS (public sector) $57 billion California State Controller’s Office
In budget numbers, medium-sized Modesto City Schools will pay $2.9 million more this year than last for its teachers based on 2014-15 salary levels.
By 2021, Modesto schools would pay $15.3 million more to CalSTRS even if they gave no raises, and the average Modesto teacher would pay $1,675 more out of pocket. Even with all that additional money, it will still take until 2046 for CalSTRS to cover its obligations.
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.
I do understand, when the taxpayers say they’re mad (about pension liabilities). It ticks me off, too.
James Enochs to California Watch in 2010
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.
The difference means a Modesto teacher who worked for 38 years, earning $90,600 in base pay and $15,000 to $20,000 for extra work his last two years, retired at 61 with a pension of $100,454, according to the CalSTRS list.
Had he been making that same amount, but contributing to Social Security instead, he would now be living on $21,180 a year. If he had worked five more years, to the Social Security maximum benefit age, he could expect $29,448.
189 Modesto City Schools retirees received more in pension than the average district teacher made working in 2014, $81,720
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.
Top 10 retirements
California State Teachers’ Retirement System payments for 2014 included these high earners in this region:
- 1. $261,510 James Enochs, Modesto City Schools
- 2. $238,855 Henry Escobar, Livingston Union Elementary
- 3. $238,834 Fredrick Wentworth, San Joaquin County Office of Education
- 4. $202,800 Arturo Flores, Modesto City Schools
- 5. $198,981 Robert Fore, Merced Union High
- 6. $198,712 Martin Petersen, Stanislaus County Office of Education
- 7. $190,091 Bill Gibson, Turlock Unified
- 8. $186,467 Wendell Chun, Oakdale Joint Unified
- 9. $182,207 John Keiter, Summerville Union High
- 10. $180,623 Carolyn Strelosmith, Calaveras Unified