June 17, 2022

COLA increase is not enough to cover actual costs of increased pension rates

School Services Q & A shows alarming data that COLA increases don’t equal the actual costs associated with the pension increases slated for 22-23.

Q. Since the statutory COLA is 6.56%, the new budget increase should be more than enough of a percentage increase to pay rising employer contributions and that any additional base grant funding is for other priorities. Specifically, the CalSTRS rate is going from 16.92% to 19.10% which is only a 2.18% increase and is far below the 6.56% COLA. We should be held harmless from the cost increase, correct?

A. Not really. While Governor Newson’s May Revision proposal provides an additional $2.1 billion in ongoing Proposition 98 General Fund monies to increase LCFF base funding, when you make a small change to a percentage applied to a big number, up or down, the result is often a big number. In the example you provided above, the change in the CalSTRS rate is indeed a change of 2.18% with those two rates. However, when applying those two rates to a large number like certificated salaries, it results in a much larger percentage increase in actual dollars that a local educational agency (LEA) would be paying into CalSTRS. Here is an example:

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