Copyright© 2006 by School Services of California, Inc.

                                      Volume 19                   For Publication Date: December 15, 2006             No. 26

Attorney General Opines: No Requirement to Increase
Proposition 98 for STRS Rate Increase 

If the Legislature required school employers to contribute more toward teachers’ retirement, would Proposition 98’s minimum guarantee be increased by a corresponding amount? 

The answer is “no,” according to an opinion released by the Attorney General (AG). In a four-page opinion issued on November 9, 2006, Attorney General Bill Lockyer concludes that an increase in the employer contribution rate to the State Teachers’ Retirement System (STRS) for its Defined Benefit Program “would not cause an increase in the obligation of the state to fund public education” under Proposition 98. 

The opinion specifically examined the requirements of Education Code Section 41204, subdivision (c):  

Programs that existed in the 1986-87 fiscal year, and were not the functional responsibility of school districts or community college districts in that fiscal year, shall not be shifted to the responsibility or financial support of school districts or community college districts without appropriate corresponding adjustment to the calculations made pursuant to subdivision (b) of Section 8 of Article XVI of the California Constitution . . .  

The Attorney General concludes that an increase in the employer contribute rate to STRS alone would not constitute a shift in financial responsibility as contemplated by Education Code Section 41204. The key word in the opinion is “shifted.” The AG asserts that this code section was intended to prevent the state from cutting back on its benchmark fiscal support of education by transferring programs to the financial responsibility of school districts. The AG concludes that an increased school employer contribution to STRS would not constitute a shift in fiscal responsibility.  

Unlike the Governor’s Budget proposal of 2004-05, which would have increased the school district rate and at the same time reduced the state’s rate, the AG opinion is based on a scenario in which there would be an increase in the school district rate alone. Thus, the AG concludes that “the state’s responsibility for making contributions to the Fund would not be decreased or ‘shifted’ to the districts in the proposed circumstances.” 

Perhaps the follow up to this opinion is one that addressed the specific circumstance posed in the 2004-05 budget negotiations. That is whether an adjustment to Proposition 98 would be required if both the school district rate were increased and the state rate were decreased by a corresponding amount. Under this scenario, it appears to us that the AG would have come to a different conclusion. 

—Robert Miyashiro and Paul Goldfinger