Legislation Refines Budget for Public Retirement & Education

 Keenan Blog

Legislation Refines State Budget for Public Retirement and Education

July 16, 2019

The California Legislature has passed a series of trailer bills connected with the state budget to address growing pension liabilities and the allocation of state funds to education. SB 75 details the distribution of the largest segment of state spending for schools, while SB 90 appropriates significant amounts toward the State Teachers' Retirement System (STRS) and the Public Employees' Retirement System (CalPERS) defined benefit contributions. SB 77 was also passed making necessary changes to implement the higher education provisions of the budget. Governor Newsom has signed these bills, along with the State Budget Bill (SB 74), and they go into effect immediately.

Public Employees’ Retirement

SB 90 appropriates $2.25 billion in 2018-19 for STRS for employer contributions for 2019-20 and 2020-21. For 2019-20, this will reduce employer contributions by 1.03% (approximately $500 million) and by .70% in 2020-21 (approximately $350 million). The bill also makes a supplemental payment of approximately $1.6 billion to reduce the employers' share of the unfunded pension liability; and appropriates a total of $2.9 billion from the next three fiscal years to pay down the state share of the CalSTRS unfunded liability.

A similar General Fund appropriation of $2.5 billion in 2018-19 will be transferred to CalPERS; and $500 million in the following three years to CalPERS as supplemental payments toward unfunded state liabilities for specific state employee member categories. Finally, SB 90 appropriates $904 million in 2018-19 for school employers' contributions and unfunded liabilities.


The Education trailer bill, SB 75, is extensively detailed in providing for a 3.26% cost of living adjustment in Proposition 98 funding to K-12 schools; paying back a portion of school funding owed from the fiscal crisis of 2010; establishing a number of grants and programs for special education, mental health, broadband connectivity, early childhood intervention and full-day kindergarten; and granting a variety of exemptions for specific districts under hardship.

Funding is provided for 2018-19 Local Control Funding Formula expenditures for school districts and charter schools and for other community college programs in the 2019-20 fiscal year. In addition, the bill establishes the allocation methodology to bring all local educational agencies (LEAs) to the statewide base rate for special education funding. The Special Education Early Intervention Preschool grant is established for local educational agencies based on the number of three- and four-year olds with Individualized Education Plans (IEPs), contingent upon legislation to be passed under the 2020-21 budget.

One-time General Fund amounts are being provided to programs for teacher training and continuing education for teachers and paraprofessionals, as well as a professional development program for school administrators. The Golden State Teacher Grant program offers a one-time grant of $20,000 to each student enrolled in a preliminary teaching credential program, if the student commits to working in a high-need field at a priority school for four years after the student receives a teaching credential.

The Education bill also dedicates one-time Proposition 98 funding of $36 million for the Classified School Employees Summer Assistance Program and makes changes that allow the funds to be available over three years and increases the minimum salary requirements.

The bill enacts a prohibition to charter schools from discouraging students from enrolling in a charter school or encouraging students to disenroll from a charter school based on academic performance or student characteristic, or from obtaining certain student information prior to enrollment.

Community Colleges

SB 77 makes a range of changes to implement the state budget for higher education and the provisions of the California Community Colleges Student Centered Funding Formula. Changes include capping outcomes funding to 10% of the overall formula, limiting colleges to points for the highest degree a student earns in a year, setting a three-year average for outcomes, altering the definition of a transfer student and extending the hold harmless period for an additional year.

Among other provisions, the California College Promise Program authorizes colleges meeting specified requirements to use $43 million to waive fees for first-time, full-time community college students for two academic years. Other grants and programs provide for community colleges to help support basic student needs for housing and food insecurity, as well as outreach to incarcerated and formerly incarcerated students.

This wide-ranging set of legislation will have a significant impact on schools, local government and taxpayers throughout the state. Besides providing some welcome budget relief for local agencies, there are many provisions which will assist them in their public service mission.

About Amy Donovan
Amy is Keenan's Vice President of Legislative and Regulatory Affairs, authoring the firm's Briefings and position papers on legislation, regulation and litigation that have an impact on the firm and its clients.