New­som wants ex­tra pen­sion pay­ments

An­nounce­ment made after state’s re­tire­ment li­a­bil­i­ties top $256 bil­lion

The Mercury News - - Local News - By Judy Lin CAL­mat­ters ed­u­ca­tion re­porter Ri­cardo Cano con­trib­uted to this re­port.

Fol­low­ing Jerry Brown’s foot­steps, Gov. Gavin New­som an­nounced last week he wants to make ex­tra pen­sion pay­ments even as Cal­i­for­nia’s re­tire­ment li­a­bil­i­ties for state work­ers and teach­ers top $256 bil­lion.

In un­veil­ing his first bud­get, flush with a sur­pris­ingly large sur­plus from a ro­bust econ­omy, New­som said he wants to put an ex­tra $3 bil­lion into the Cal­i­for­nia Pub­lic Em­ploy­ees’ Re­tire­ment Sys­tem (CalPERS) and an ex­tra $2.9 bil­lion over four years into the Cal­i­for­nia State Teach­ers’ Re­tire­ment Sys­tem (CalSTRS).

His ad­min­is­tra­tion es­ti­mates the ex­tra pay­ments would gen­er­ate a sav­ings of $7.2 bil­lion in CalPERS over the next three decades and $7.4 bil­lion in CalSTRS over the same pe­riod.

“That’s about build­ing re­siliency,” New­som said about be­ing pre­pared for an eco­nomic down­turn.

In ad­di­tion, the gover­nor is of­fer­ing $3 bil­lion to help school districts meet their obli­ga­tions, which would be used to re­duce their CalSTRS pay­ments and free up cash for the class­room.

Specif­i­cally, $2.3 bil­lion of that money would be used to pay down school districts’ long-term un­funded li­a­bil­ity and the re­main­der would be used to lower em­ployer con­tri­bu­tion rates over the next three years.

At Los An­ge­les Uni­fied School Dis­trict, the move lifted hopes of pos­si­bly avoid­ing a loom­ing teacher strike.

Mo­ments after New­som’s pre­sen­ta­tion, the dis­trict an­nounced it would be send­ing the L.A. teach­ers’ union a fresh pro­posal “to fur­ther re­duce class size,” and urged state law­mak­ers to “pro­vide ad­di­tional fund­ing for Los An­ge­les Uni­fied.”

“Gov. New­som is tack­ling the No. 1 fi­nan­cial dilemma that districts are fac­ing across the state, and he’s do­ing it in his first bud­get,” said Der­ick Lenox with Capi­tol Ad­vi­sors Group, which lob­bies for school districts. “And by the way, it’s not sexy to pre­pay pen­sion con­tri­bu­tions, it’s just fi­nan­cially smart.”

Con­ser­va­tives gave New­som credit for the ex­tra pay­ment but noted the size of the long-term li­a­bil­ity.

Cal­i­for­nia’s re­tire­ment li­a­bil­i­ties now add up to $256.5 bil­lion, ac­cord­ing to New­som’s fi­nance de­part­ment.

“That’s a great start, but hardly ad­e­quate to ad­dress the grow­ing pen­sion and re­tiree health­care costs that state and lo­cal gov­ern­ments are now re­quired to ac­knowl­edge in their (fi­nan­cial re­ports),” said state Sen. John Moor­lach, R-Costa Mesa.

New­som

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