Tag Archive for: California Teachers Association

A Recommendation for the California Teachers Association

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This week a fascinating article on the website of the Education Intelligence Agency revealed that the California Teachers Association, one of the most powerful labor unions in the world, is itself having labor problems. Moreover, the labor problems they’re encountering are because they’re trying to be fiscally responsible.

Setting aside for a moment all the grievances that education reformers and concerned parents may have towards the CTA, what they are experiencing right now is an opportunity for a broader consensus to form on one specific and very big issue; pension reform.

It shouldn’t be necessary to explain that California’s public employee pension systems are in trouble. Back in 2019, despite still being in a bull market lasting over a decade, most of California’s public employee pensions systems were already challenged; CalPERS reported their system to be 71 percent funded as of 6/30/2019, and CalSTRS reported an even more dismal 66 percent funding.

And then came COVID. Despite the COVID shutdown affecting at most half their fiscal year, CalPERS reported earnings for the twelve months ended 6/30/2020 of only 4.7 percent, and for the same period CalSTRS reported earnings of only 3.9 percent. To say the bull market is over is inadequate. We are at the end of an era.

The CTA can lower their pension formulas to CalSTRS levels

Someone unfamiliar with the CTA’s employees might assume that these union professionals representing teachers receive the same pension benefits as the teachers they represent. Not so. The following chart shows the pension benefit plans for teachers who are part of the CalSTRS system.

The above chart, taken from the CalSTRS website, offers a fairly typical snapshot of how defined benefit pensions work. As noted in the overhead caption, “service credit” refers to the number of years an employee worked. The “age factor” or multiplier, is used to calculate the pension. The chart shows two cases, columns 1-2 for employees hired before 2013, columns 3-4 for employees hired during 2013 or afterwards.

As can be seen, the baseline retirement age for pre-2013 CalSTRS participants is 60, and for post-2013 participants it is 62. In both cases, if they retire in their baseline year, their pension is their final pension-eligible salary times the number of years they worked, times 2.0 percent. If they retire earlier, that 2.0 percent multiplier is lowered, and if they defer retirement, the multiplier is raised. This is done in an attempt to equalize the overall value of a retirement. If you retire early, you collect less money per month for a longer period of time. If you retire late, you collect more money for a shorter period of time.

The CTA’s Own Union Employees Have a Better Pension Formula than CalSTRS

The CTA may be a labor union, but the professionals who work for the CTA are themselves represented by a union, the “California Staff Organization” (CSO). As videos on their website attest, the members are upset at changes the CTA is proposing to its pension plan.

The pension system for CTA employees is the “California Teachers Association Employees’ Retirement Benefits Trust.” As disclosed to participants in 2019, this pension system is entering a “critical” status which under federal law means it will have to adopt a “rehabilitation plan” to restore the plan to good financial health.

As a digression, the CTA’s pension system, unlike CalSTRS and CalPERS, is subject to federal oversight under the Employee Retirement Income Security Act of 1974 (ERISA). Why public employee pension plans are exempt from ERISA is indefensible, but that is a discussion for another day. Under ERISA, the CTA’s plan is considered in critical condition even though it is 75 percent funded, better than CalPERS or CalSTRS. Let that sink in.

To financially rehabilitate their pension system, the CTA is proposing an assortment of revisions to the benefit formulas, presumably in search of a combination of changes that will be accepted by their employee union and also pass review by federal regulators. But what are the benefits today?

To answer this, a good source are the FAQs released by the CTA to describe the proposed changes to their members. According to this document, question 12 describes the current plan. It offers a 3.0 percent multiplier at age 65, which is better than what CalSTRS teachers get – referring to the above chart, the CalSTRS multiplier at age 65 in only 2.4 percent. But that’s not the whole story.

CTA employees also get what is called an “early retirement subsidy,” which in effect means the 3.0 percent multiplier is used at any point after age 50. This is an incredibly generous value. Eliminating it retroactively would indeed have a dramatic impact on the expectations of CTA employees nearing retirement. Eliminating the subsidy just for future work would still be a significant change, one that would certainly be easier to defend as equitable.

But why, thanks to the “early retirement subsidy,” are CTA employees getting a 3 percent at 50 retirement package, when the teachers they represent were getting a 2 percent at 60, and only 1.4 percent at 55? Why are CTA employees earning a pension benefit literally twice as valuable as the teachers they fight for?

There’s obviously a lot more to this story. Maybe taking into account other factors, such as the level of employee contributions to their pensions via payroll withholding, the CTA pension benefit isn’t twice as valuable as the CalSTRS benefit for teachers. That’s fine. Taking everything into account, it’s still a lot better.

Not all advocates for pension reform call for elimination of the defined benefit plan in favor of a defined contribution plan. A defined contribution plan offers no guarantees to retirees, because only the employer’s contribution is fixed and guaranteed. If a person happens to retire during an extended period of market losses, or happens to live a longer than average life, they’re screwed with a defined contribution plan. This is why a defined benefit retirement plan, properly managed, is worth fighting for.

ERISA is a valuable tool to ensure defined benefit pensions stay within reasonable financial bounds. When the CTA’s pension plan strayed into financially unsustainable waters, ERISA came calling. Now the CTA management and workforce can use this opportunity to ask themselves: why on earth did we think we were entitled to a defined benefit retirement plan so much better than the teachers we represent?

The good news for CTA: If they lower their retirement benefit formulas to conform exactly to what CalSTRS offers, their funded status will likely crawl out of critical condition. And if they had a financially healthy retirement plan that was identical in structure to the CalSTRS plan, they would acquire at least some moral credibility when advocating to preserve CalSTRS benefits.

This article originally appeared in the California Globe.

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Teachers Union Promotes Property Tax Increase

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Last week what is arguably California’s most powerful political special interest, the California Teachers Association (CTA), or teachers union, held its quarterly State Council of Education meeting at the plush Westin Bonaventure Hotel in downtown Los Angeles.

The CTA reported revenues of $209 million on their most recent IRS Form 990 (results through 8/31/2018), and their total assets increased from $296 million to $334 million. The CTA’s “savings and temporary cash investments” increased from $56 million to $79 million during their most recent year of operations.

Even here in California, these are astonishing sums of money. Moreover, the CTA, operating statewide, only wields about half of the teachers union’s financial firepower deployed in California. Additional financial resources come from the CTA’s national affiliate, the National Education Association, as well as from the dozens of major local affiliates, such as the United Teachers of Los Angeles.

Getting Rid of Proposition 13 Protection for Commercial Properties

A helpful mole inside the CTA’s recent meeting has provided four examples of what is one of the top priorities for the CTA these days, which is to strip commercial properties of the protections they have enjoyed under Prop. 13. To that end, they have endorsed and are major contributors to the “Schools & Communities First” state ballot initiative, likely to face voters in November 2020.

Since 1978, Prop. 13 has limited property assessments to a maximum of 2 percent increases per year when calculating the base on which to impose property taxes. The only time the taxable base value is reset is when a property is sold. If a business property is inherited, to purposes of property taxation the descendants inherit the base value without reassessment.

Let’s be clear, Prop. 13 protection constitutes one of the last, if not the last, advantage businesses have when trying to operate in California. As this first flyer shows, that last bit of relief businesses get in what is the most inhospitable state in America is not as important as putting “Schools & Communities First.”

A very long time ago, presidential candidate Ronald Reagan famously had this to say about business taxes:

“Some say shift the tax burden to business and industry, but business doesn’t pay taxes. Oh, don’t get the wrong idea. Business is being taxed, so much so that we’re being priced out of the world market. But business must pass its costs of operations–and that includes taxes–on to the customer in the price of the product. Only people pay taxes, all the taxes. Government just uses businesses in a kind of sneaky way to help collect the taxes. They’re hidden in the price; we aren’t aware of how much tax we actually pay.”

In reality, it’s worse than that, because the corporations that will be able to pass on higher costs to the consumer will be the major multinational corporations, the franchises, the chains, whatever outposts of big business that haven’t already pulled out of California.

The victims, that will not be able to pass on higher costs to the consumer when their property taxes suddenly go sky high are the small family owned businesses. Many of these small businesses are multi-generational, and the only reason they have been able to stay in business is because their property taxes are manageable. But have a look at this next flyer.

According to the CTA, the “Schools and Communities First” Act will “level the playing field for all the businesses that already pay their fair share.” Wrong. It will tilt the playing field in favor of the mega-corporations, taking away the last advantage of the little guys.

The dirty secret that the CTA in particular and California’s one-party political establishment in general don’t want voters to know is that over-regulation helps big business. The biggest, most financially secure businesses use regulations to consolidate their position at the top, while the smaller competitors die off because they can’t to afford to comply.

If you’re wondering how the CTA intends to get the “Schools & Communities First” Act onto the ballot, have a look at this next flyer. There’s big money behind gathering signatures, but in Los Angeles last week the CTA was making sure every available activist had a chance to get personally involved.

How could anyone refuse this pitch? Look at the boxes that are prechecked: “End the shady tax breaks for corporations and wealthy investors.” Too bad the biggest ones are the least harmed by this change in the law, while the mom and pop businesses are going to drop like flies.

As for “Reclaim over $12 billion per year for K-12 schools and communities,” well, that’s right, the estimated annual proceeds of $12 billion – 100 percent of which will be passed on to consumers in the form of higher prices – will be thrown into the maw of California’s public education budget.

The problem with this is simple: The educational policies supported by the CTA are not going to improve education. In fact one might say it is the educational policies supported by the CTA that have grossly undermined the quality of K-12 public education in California. So we’ll give them more money with no change in these policies?

This next flyer shows the reach of the CTA, enlisting an army of teachers and other school employees to actively solicit signatures for the “Schools & Communities First” Act.  But it’s important to note that the CTA, and the PAC it supports, does not need volunteer assistance.

According to the California Fair Political Practices Commission, the “top aggregated contributions” for the “Schools & Communities First” Act, Measure # 1864, already has collected $11.5 million, which even these days should be sufficient to pay professionals to gather the requisite signatures.

What Ought to be Preconditions for Increasing School Funding?

The problem with opposing measures like this is rooted in the very human and very virtuous urge most people feel to do the right thing. Who opposes something that will “help the children learn?” Who doesn’t want teachers to receive a “living wage?” The answer, of course, is that nobody apart from the most hardened misanthropes would ever oppose these things. The problem is that the educational policies the CTA pushes are not going to help the children learn, and the pay increases they want to give the teachers will not reward the best teachers.

For example, whether or not all public school teachers are underpaid is debatable, but clearly the finest teachers are underpaid, because the union work rules do not sufficiently reward the finest teachers. The Vergara case, not even heard by the California Supreme Court based on a technicality, offers compelling evidence of the damage caused by these work rules.

In the case, which challenged statutes governing layoff, dismissal, and tenure policies, the plaintiffs argued that by favoring seniority over merit in layoffs, by making it extremely difficult to fire incompetent teachers, and by awarding tenure after barely a 1.5 years of classroom observation, students were denied quality education. Moreover, the negative impact of these statutes had a disproportionate impact in low income communities. Watch the plaintiff’s closing arguments, made six years ago in a Los Angeles courtroom, to see how persuasive those arguments were and also to realize how much California’s students lost when that case died.

California’s teachers should be paid more when California’s teachers are truly held accountable for their performance and when incompetent teachers are fired.

One may argue endlessly about the effectiveness of union work rules, just like one may argue about Common Core and a host of other curricula that are, depending on who you ask, either necessary preparation for life in the 21st century or divisive and destructive indoctrination. But it wouldn’t matter if parents had a choice about where they send their children to school.

And this brings us to the other big issue, school choice. The CTA opposes expansion of charter schools, making the dubious claim that charter schools take money away from traditional public schools. The problem with that claim is that if the charter schools were defunded, returning that money to the traditional public schools, the charter school students would also return to traditional public schools, making crowded classrooms even more crowded. For much more on the fallacy that charter schools damage the finances of traditional public schools, read “Modest Strike Settlement Nonetheless Puts LAUSD in Even Worse Financial Shape.”

Moreover, why should charter schools, which compete for students, permit diverse educational strategies, and leave power in the hands of fully accountable principals to hire and fire teachers, be the only solution? Why are school vouchers considered a third rail by education reformers as much as by the opponents of vouchers? Why? Why not allow parents to receive vouchers that they can use to pay for their children to go to any accredited school they want, whether it’s public, private, charter, parochial, or home schooling? Why should parents whose children could never thrive in a traditional public school pay taxes to support those schools, then also have to pay tuition for private schools?

The bottom line with the California Teachers Association is that it does not want teachers or schools to be held accountable for their performance, much less to compete for students. They just want more money.

This article originally appeared on the website California Globe.

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