As Superintendent of Berkeley Unified School District (BUSD), I am committed to sharing clear information regarding the District’s funding, our expenses, and the District budget. Our shared understanding drives critical conversations we must hold in community as we strive to meet our promise of Excellence, Equity, Engagement, and Enrichment for all of our students.
In Part One of this series, I provided background and information about the challenges of flattening state funding at a time when the District’s expenses continue to grow. In Part Two I explained how Restricted Funding supplements our overall budget by providing money that can only be spent on certain purposes. In this third post I’ll explain more about why the annual Cost Of Living Adjustment (COLA) to state funding is insufficient in respect to the District’s rapidly rising costs, especially looking at ballooning costs like the District’s mandated contribution to California’s employee retirement funds.
The Cost of Living Adjustment (COLA) to State Funding
You’ll remember from Part One of this series that last year the State achieved its Local Control Funding Formula (LCFF) funding targets. As a result, BUSD is now receiving only a very modest annual COLA to state funding. This means we are essentially in the same situation that existed prior to the LCFF—operating in a structural deficit as our state-provided revenue can’t keep pace with our expenses.
The State’s Local Control Funding Formula (LCFF) achieved “full funding” last year. This means annual funding increases will now only include a small Cost Of Living Adjustment (COLA).
COLA Doesn’t Reflect the District’s Actual Expenses
While one might assume an annual cost of living adjustment for a California school district would cover the actual increases in annual district expenses, that isn’t the case for BUSD and many other California school districts. This is largely due to the fact that the State’s determination of COLA is based on factors that aren’t reflective of the actual costs incurred by BUSD.
According to the California Legislative Analyst’s Office: State law links this COLA to a national price index developed by the Bureau of Economic Analysis (a division of the U.S. Department of Commerce). This index is designed to reflect the cost of goods and services purchased by state and local governments across the country. The largest component of the index is employee wages and salaries. Other components include fuel, utilities, office supplies, and equipment. State law bases the rate on the average value of this index over the 12 month period ending in March of the prior year with the 12 month period ending in March of the current year.
Most of us who live in the Bay Area understand that the cost of living we experience here is not reflected across the country. This is true for the District as well. As a result, the modest annual COLA to state funding derived using this national price index is no match for dramatically rising costs in the District.
What’s more, nearly the entire amount that BUSD expects to receive as its Cost of Living Adjustment in the 2020-2021 school year is already claimed for known increased expenses. Of the $2.4M of additional funding we expect to receive, we expect that $800,000 will go to the regular increases in pay associated with our salary schedules (step and column increases). Another $500,000 will be required to meet our obligations to provide our students with important Special Education services. And still another portion – $1M – will be needed for required increases in BUSD’s contributions to employees’ retirement benefits. This leaves only a small amount left for other costs.
In effect, COLA increases don’t provide districts with resources to increase the salaries of our employees.
A Closer Look: Increasing Retirement Expenses
Let’s look more closely at the district’s mandatory contributions to the State employee retirement funds. During the 2019-2020 school year, BUSD’s mandated contribution to the California State Teachers Retirement System (CalSTRS) and the California Public Employee Retirement System (CalPERS) will hit approximately $21.7M. That represents 12.8% of the District’s total General Fund. Another way to think about this is that 12.8 cents out of every dollar in the District’s General Fund will go directly to these two pension funds. Meanwhile, employees are also required to contribute increasing percentages of their paycheck, now as much as 10.25% of their salary, to this system as well.
This chart shows the mandated percentage contribution by the District to California’s employee retirement funds. For example, in 2014 the District had to contribute 8.88% of a teacher’s salary to CalSTRS. By 2020 the contribution will be 19.1% of a teacher’s salary.
The COLA increase to state funding is inadequate, doesn’t reflect the financial realities of operating a school district in the Bay Area, and paints an unsustainable long-term picture for BUSD and many California school districts. We’ll need to come together as a community invested in providing a quality education to all our students and seek solutions beyond further cutting of staff, services and programs. As I mentioned in Part One of this series, this is why three important measures in support of Berkeley schools are planned for the March 2020 Ballot.
Reliance on Local Solutions
Even though it’s not fair to expect local communities to make up for shortfalls in state funding, this is what many Bay Area communities are finding to be necessary. The Board of Education is expected to vote to approve on November 20 the new “Berkeley Educator Recruitment and Retention Act”. This parcel tax, which Berkeley voters will consider in March, will generate additional funds that can be spent on salaries, adding much needed resources for recruitment and retention. Many local districts have already passed or are planning to pass similar funding measures.
Even with this new tax revenue, I expect that there will be no way around additional cuts to the General Fund budget in the 2020-2021 school year. Though we don’t know right now how much we’ll need to cut, the numbers I’ve shared over these three budget posts suggest that this may be $1M or more.
Through work with the Parent Advisory Committee and the Superintendent’s Budget Advisory Committee, as well as the engagement of BUSD staff, families and our community, I’m confident we will find solutions to these budget challenges and continue to meet our mission to enable and inspire our diverse student body to achieve academic excellence and make positive contributions to our world.