One of the best ideas in the budget Gov. Gavin Newsom unveiled Thursday was his plan to give $3 billion to the California Public Employees’ Retirement System and $2.9 billion over four years to the California State Teachers’ Retirement System to pay down unfunded pension liabilities for state workers and teachers estimated to be $162 billion.

Instead of using the state’s projected $21.5 billion surplus to launch new programs that would be unaffordable when a recession hit and revenue plunged, Newsom wants to use a huge chunk to strengthen the state’s long-term fiscal picture. That’s smart. It’s akin to a family that came into a windfall choosing to use part of it to pay down its credit-card debt.

But Newsom’s proposal to also give school districts $3 billion to directly meet their pension obligations isn’t a policy slam dunk at all. It amounts to a back-door increase of $3 billion in future state education budgets. It could set a precedent under which districts struggling with the enormous cost of pensions would expect additional help year after year. As tight as many school district budgets are now, they will be even harder hit in the 2019-20 and 2020-21 fiscal years when two more increases kick in for required CalSTRS contributions.

Those increases were part of the bailout of CalSTRS enacted in 2014 by the Legislature and Gov. Jerry Brown. It required school districts, the state and teachers to steadily increase their contributions from 2014-15 to 2020-21. But 70 percent of the additional annual $5 billion it’s expected to create when fully phased in must come from districts, with the state paying 20 percent and teachers 10 percent. This requirement already has by far the state’s largest district — Los Angeles Unified — in dire straits, on track to spend $2 billion more than it takes in from July 2018 to June 2021. This backdrop is key to the teachers strike expected to begin Monday.


Lawmakers were right to focus on CalSTRS’ long-term health in 2014. But they should have also tried harder to limit the costs of pensions and retiree health care. The bailout may need a bailout.

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