Fri10242014

News

Changes in employer pension funding hit LASD


The financial outlook for the Los Altos School District appeared a little less bright after changes to the state budget required increasing employer contributions to state pension funds.

The expectation was that with rising property-tax collections, the district would be in a healthier financial position than in the past few years.

So healthy, in fact, that district officials – after meeting with employee groups and the board of trustees – recently approved sizable raises, the first in several years. A few weeks ago the district authorized 4 percent raises for the current year, and 3 percent boosts for the next two years for its employee groups – a 10 percent salary bump over three years.

Randy Kenyon, assistant superintendent for business services, said the state legislature and Gov. Jerry Brown approved a “compromise plan” to increase contributions to the State Teachers’ Retirement System (STRS) to remedy the unfunded liability.

Financially speaking, it’s not the best news for the district, Kenyon said, especially because the Public Employees’ Retirement System (PERS) will likely follow suit.

The increases in employer contributions translate to the district having to more than double what it currently pays into STRS and PERS over a seven-year period. Kenyon estimated that by the 2019-2020 school year, the rate increases would deplete reserves by approximately $10 million.

The employee salary raises would also cost the district approximately $10 million over the next six years.

During his June 23 presentation of the budget, Kenyon reminded trustees that both the employees’ associations and the district could unilaterally opt out of the salary agreement in either or both of the years the raises are scheduled – as long as they serve notice prior to Sept. 30 of the affected year.

Kenyon said the impact of the budget adjustments with no other changes in assumptions would drain reserves by the end of the 2016-2017 school year.

“Unless property-tax revenues grow faster than currently projected, the district will need to take corrective action,” he said.

The board approved the district’s budget June 23. Kenyon will submit the budget to the state and revise it over the next 45 days.

Kenyon warned the board that “corrective action” might be needed within the next two years as a result of the pension changes.

Bond update

Trustees discussed updates to a potential November bond measure at the June 23 meeting.

The Facilities Advisory Committee submitted a report to district officials that parses estimates of project costs. The board is scheduled to prioritize improvements at future meetings.

Kenyon deemed the committee’s estimates for acquiring two new school sites cost prohibitive and recommended that the district focus on securing one new site. The committee suggested that the district first address solving its enrollment-growth problems before considering updates to current campuses.

The committee also recommended that the district explore either increasing capacity at K-6 schools or junior highs by transition to a middle-school model.

Kenyon said funding the Facilities Master Plan (all projects) could run as high as $350 million or more.

“Funding at that level is not likely available, so prioritizing is essential,” he said.

According to Kenyon, funding is likely to come from a bond measure ($150 million) and/or borrowing against future revenues.

The district received good news from a recent survey of local voters: Support for a bond measure is up, with 59 percent of potential voters pledging their support and an additional 6 percent claiming that they lean yes. The type of bond the district would propose requires approval from 55 percent of voters.

Moving forward, the district was scheduled to begin a series of four special meetings Monday, after the Town Crier’s press deadline, to prioritize items for the bond measure. Subsequent meetings are slated July 28 and 30.

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