Lambert, William S. - United Teachers Los Angeles

United Teachers Los Angeles
3303 Wilshire Blvd., 10th Floor
Los Angeles, CA 90010
(213) 487-5560
www.lausd.kl2.ca.usa/~utla
Serving Los Angeles teachers with the California Teachers Association/National Education Association and the California Federation of Teachers/American Federation of Teachers, AFL-CIO

Impact of Mandatory Coverage of State and Local Workers on Public Education in California
Presentation by William S. Lambert
I am here to express the very grave concern of the California public school system and its teachers over a possible proposal to impose mandatory Social Security coverage on new State and local government workers as part of the current effort to restore the long-term solvency of the Social Security trust fund.
Such a proposal would have a devastating fiscal impact on the California school system and would seriously undermine the State's pending effort to achieve the very class-size reduction that the President and the Vice President have been advocating as a national policy.
I represent the United Teachers of Los Angeles, the 40,000 teachers who work for the Los Angeles Unified School District (LAUSD), the largest school district in California. Statewide, California has over 400,000 active teachers working for 1,100 school districts.
Mandating our teachers into Social Security will have a harsh impact on both school districts and teachers. School districts will have to respond to the mandate in one of a number of ways, all of which negatively impact teachers and the cost of public education:

Pay an additional 6.2% of payroll for Social Security on top of employer costs required to fund the retirement benefits provided by the California State Teachers' Retirement System (CalSTRS).
This scenario would cost LAUSD alone $440 million in the first 10 years. On a statewide basis, this alternative is projected to cost school districts $3.8 billion dollars in the first 10 years. If the school district has to absorb the cost of the employee's 6.2% tax, this cost to the district could double.

Reduce CalSTRS benefits to a level that when combined with Social Security benefits would equate to the current level of benefits provided by CalSTRS.
If Social Security is substituted for a large portion of the current State pension benefit, contributions to the State plan will have to increase substantially in order to fund the same level of benefits as currently provided to California teachers. CalSTRS has calculated these costs at over 7% of payroll. Based upon California's estimated current teacher payroll of $16 billion, the increase in total cost would be $1.1 billion per year, and increasing over time with growth in payroll. If the employer is required to absorb these costs, the impact to school districts would be doubled. If employees were required to share these increased costs, the impact of mandating Social Security would mean a reduction in salary of nearly 10 percent (6.2% SS tax plus 3.5% increased retirement costs).

Reduce CalSTRS benefits to that which can be funded within current contribution levels after funding mandatory Social Security contributions.
Employers cannot provide an adequate benefit with the funds remaining after paying mandatory Social Security contributions. Staying within current contribution cost levels leaves only a 1.8% of compensation sliver to fund CalSTRS retirement benefits. You are then requiring teachers to reduce their standard of living in retirement. How are employers suppose to attract qualified and talented teachers into a profession that can't provide adequate retirement benefits? Schools will not be able to achieve its goal of educating our children.

In any scenario, school districts and their teachers will be harmed permanently. For what? To extend the solvency of the Social Security trust fund for a mere two years. Two years. Certainly this does not justify the decimation of school districts in California. It will be our school children who will suffer. There will be decreased money for textbooks, library services, athletic programs, music programs. The list goes on.
California's budget outlook for the near future has just been released and the forecast is grim. With current projections showing a $1 billion shortfall in the budget beginning July 1, 1999, Governor-elect Gray Davis has recently announced that the aggressive education reform he campaigned on must be scaled back. In addition, California school districts are already attempting to implement its broad-ranging new class-size reduction programs. Mandatory coverage is certain to impede if not halt school districts' ability to fully implement class size reduction and other education reforms.
In addition to the impact that will be felt by teachers as a result of the increased employer costs, there are the real hard dollar costs that will hit teachers. At a minimum, teachers will have a reduction in their take home pay of at least the 6.2% Social Security contribution and potentially as much as 10% with the increased State retirement plan cost. Teachers in Los Angeles can't afford to achieve the American dream of buying a house now on their current salaries. How can they ever hope to with a loss in take-home pay of these proportions? If school districts are required to increase salaries to offset the impact of the Social Security tax on employees (as I can assure you UTLA will make every effort to do); the harsh fiscal impact on school districts will be just that much greater.
Proponents of mandatory coverage argue that mandating uncovered public employees into the Social Security system is only a matter of fairness and equity. UTLA takes exception with that argument. Where were these arguments before Social Security reached crisis mode? Mandatory coverage would not be proposed at this time if not for the condition of the Social Security trust fund. So let's call this what it really is - a bailout of the Social Security trust fund on the backs of school teachers and other state and local workers who did not create the problem.
UTLA is opposed to mandatory Social Security on the basis that it is blatantly unfair to now mandate into Social Security employees originally prevented from participating and instead told to fend for themselves. Public employees did just that and now will be penalized for it. I ask you - where is the fairness and equity in that?