Thursday, July 12, 2012


By Kimberly Beltran, SI&A Cabinet Report |

Thursday, July 12, 2012  ::  Even as Gov. Jerry Brown and the Legislature’s Democratic leaders trade plans for public pension reform, one San Francisco lawmaker is pushing to require the state’s charter schools to enroll in the California State Teachers’ Retirement System and the California Public Employees’ Retirement System.

The aim of Assemblyman Tom Ammiano’s AB 1819 would be to have charters meet another obligation already required of traditional public schools. The bill will be taken up by the Senate Appropriations Committee when the Legislature reconvenes in August.

“Assemblymember Ammiano strongly feels [charter school teachers], as members of the public school employee population, deserve a public retirement system that adequately reflects their service to the community,” said Curtis Notsinneh, a senior advisor in Ammiano’s office.

Public pension plans have come under intense scrutiny since the onset of the economic recession, and have been targeted as overly generous, too costly to state taxpayers and in need of restructuring.

Brown, last October, unveiled a pension reform plan he hoped lawmakers would take up, but other issues – including hefty budget deficits, water systems and education finance reform – dominated the first half of this year’s Legislative session.

Although the governor just this week backed away from a goal of putting pension reform on the fall ballot, it is still likely to take center stage in August. Brown is one of many around the Capitol who believe it necessary to coax voters into approving the $7 billion November tax measure aimed at raising money for schools and public safety.

Charter school representatives are opposed to AB 1819, saying it is unnecessary, constitutes over-regulation and would probably not be signed by Brown, even in the unlikely event it wins Legislative support.

Most charter schools, they point out, already participate in CalSTRS, and those that don’t – about 81 of the state’s 989 charters – offer other retirement options, usually a combination of Social Security and either a 401k or 403b plan.

“This is a solution in search of a problem,” said California Charter Schools Association president and CEO Jed Wallace. “We see that there’s no problem; there’s no need for some new bill or solution and we see no reason to force all charter schools to participate as this bill would require.

“We think it’s a very healthy thing that charter schools have the option to participate in these state retirement systems if they want to, and the majority of schools do,” Wallace added, “but we also think it’s perfectly fine for schools to offer different retirement options to their employees, and that diversity is great from a programmatic standpoint within charter schools but it’s also great from an operational standpoint as well.”

While the required employer contribution for the un-enrolled charter schools to participate in CalSTRS would increase by less than one percent, according to Notsinneh, charter advocates say there are likely to be other problems if these schools are suddenly told they have to switch plans.

“In some cases, charter schools don’t have the option of shutting off or unwinding their current plans,” said Eric Premack, director of the Charter School Development Center. “You can’t just tell Social Security ‘hey, we’re not going to play anymore.’ ”

Premack also said that while the cost of switching to CalSTRS might not seem like a big increase, buying into the CalPERS system is much more costly.

The employer contribution is currently in the 11 percent range and is expected to be going up to 13 or 14 percent, he said. Combined with the required FICA deduction of 6.4 percent, the cost implications to charter schools of buying in “are staggering,” Premack said.

Because CalPERS is for classified employees – non teachers – forcing charter schools to switch to this retirement plan would likely affect employment for aides, custodians and other school support staff.

“Charter schools already tend to have fewer classified staff,” Premack said. “If this were to go through, it would create a much stronger incentive for schools to fire or outsource them.”

Meanwhile, as of January, there were at least four pension reform initiatives that supporters were trying to qualify for the November ballot – all of which would trim benefits for public employees. None had yet qualified as of this week.

The governor’s plan, although also sweeping and controversial, avoids changes that negatively impact current employees, focusing instead on changing the rules for future hires.

Brown’s 12-point reform package includes proposals to end abuses and tighten pension funding rules as well as several systemic changes such as limiting post-retirement public employment and creating a hybrid plan that reduces the current defined – or guaranteed – benefit component by combining it with a 401(k)-type defined employee contribution.

The reform will require new legislation, including a possible constitutional amendment, as well as other statutory changes.

Also, of concern to many Legislators are the unfunded liabilities – the difference between what is owed and what is available – in CalSTRS and CalPERS, which the governor’s plan does not address because it would mean making changes to employee benefits guaranteed under union-negotiated contracts.

CalSTRS’ unfunded liability gap has been estimated at between $56 billion and $78 billion while CalPERS’ is estimated at $500 billion.


Bill Analysis + Status

AB 1819 (Ammiano)
Charter schools: State Teachers’ Retirement Plan.

Existing law provides that all employees of a charter school who perform creditable service are entitled to have that service covered under the Defined Benefit Program of the State Teachers’ Retirement Plan, if the charter school elects to make that plan available. Existing law further requires a charter school that elects to make that or another plan available to inform all applicants for employment of the retirement options for employees of the charter school, as specified.

This bill would require charter schools to make the State Teachers’ Retirement Plan and the Public Employees’ Retirement Plan available to its employees, as specified, and would make corresponding changes to the information charter schools are required to provide regarding retirement options. The bill would provide that these provisions shall not apply to the extent they would cause the State Teachers’ Retirement System or the Public Employees’ Retirement System or their members to incur adverse tax consequences under federal law.

Existing law requires every county superintendent of schools to enter into a contract with the Board of Administration of the Public Employees’ Retirement System for inclusion of the school district’s classified employees in the system. Existing law further provides that, if a charter school chooses to participate in the system, its qualified employees shall be covered under the system in the same manner as the employees of the school district that granted the charter.

This bill would provide that all qualified employees of a charter school shall be covered under the system in the same manner as the employees of the school district that granted the charter, except as specified. The bill would require the county superintendent of schools to notify the board before a charter school or its employees may be enrolled for membership in the system.

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