Two Systems, One Mission
Every California public school employee who works enough hours earns the right to a state-administered defined benefit pension — but which pension system depends on your job classification. Teachers and other certificated employees participate in CalSTRS. Classified employees — bus drivers, custodians, instructional aides, office staff, and more — participate in CalPERS through the Schools Pool.
Understanding how these systems are funded matters for every school employee and community member. Pension contribution costs paid by your district come directly out of the same general fund that pays salaries, maintains buildings, and supports programs. This page explains both systems and the history of state cost-sharing — including the now-defunct SB 6 offset that once shielded districts from rising CalPERS costs.
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Certificated Employees
Who is covered: CalSTRS serves certificated public school employees — meaning those who hold a credential or certificate issued by the Commission on Teacher Credentialing (CTC). This includes classroom teachers (TK–12 and community college), administrators, counselors, librarians, and school psychologists who hold credentials.
How it's funded: CalSTRS is supported by three streams of revenue:
| Contributor | Approximate Rate (2024–25) | Notes |
|---|---|---|
| Member (Employee) | 10.205% of creditable compensation | Deducted directly from each paycheck; set by statute |
| Employer (School District) | 19.10% of creditable compensation | Paid by the district from general fund; increased significantly since 2014 |
| State of California | ~9.328% (direct General Fund appropriation) | Unique to CalSTRS — the state pays a share directly. CalPERS does not receive this. |
| Source: CalSTRS employer contribution schedule, AB 1469 (2014). Rates subject to annual actuarial adjustment. Figures approximate for 2024–25. | ||
The AB 1469 ramp-up (2014–2020): For decades, CalSTRS was significantly underfunded. Assembly Bill 1469 (2014) set a mandatory schedule to raise district employer contributions from roughly 8% to over 19% over six years — one of the largest unfunded liability paydown efforts in California history. Districts absorbed these rising costs with no direct automatic state offset.
Classified Employees
Who is covered: CalPERS covers classified (non-certificated) public school employees. This is the backbone retirement program for the employees who make schools run day-to-day:
☙ Administrative assistants and office staff
☙ Instructional aides and paraeducators
☙ Bus drivers and transportation workers
☙ Custodial and maintenance staff
☙ Food service / nutrition workers
☙ Technology and technical support staff
☙ Library technicians and clerks
☙ Campus supervisors and security
Note: Classified employees who are also Social Security-covered employees may participate in both systems.
System structure — the Schools Pool: School districts do not have their own separate CalPERS plan. They participate in the CalPERS Schools Pool, a cost-sharing multiple-employer defined benefit arrangement. All participating school employers share in the actuarial gains and losses of the pool, and the employer contribution rate is set annually based on the pool's actuarial valuation — not on any individual district's experience.
| Contributor | Approximate Rate (2024–25) | Notes |
|---|---|---|
| Member (Employee) | 8.0% of pensionable compensation | PEPRA members hired after 1/1/2013: 8.0%. Classic members: varies by formula tier |
| Employer (School District) | ~28.6% of covered payroll | Schools Pool rate; fluctuates annually based on actuarial valuation and investment returns |
| State of California | No ongoing direct appropriation | Unlike CalSTRS, the state does not make regular direct contributions to CalPERS on behalf of schools |
| Source: CalPERS Schools Pool actuarial reports; PEPRA (AB 340, 2012). Employer rates approximate for 2024–25; set annually by CalPERS board. | ||
Why the CalPERS rate is volatile: Because the Schools Pool employer contribution rate is recalculated every year based on investment performance, demographic changes, and actuarial assumptions, districts can face sudden large increases in their payroll-based contribution burden. This was the problem that Senate Bill 6 (2001) was designed to address — and it's the same structural risk districts live with today.
Side-by-Side Comparison
| Feature | CalSTRS | CalPERS |
|---|---|---|
| Who it covers | Certificated employees (credentialed) | Classified employees (non-credentialed) |
| Plan type | Defined benefit | Defined benefit (Schools Pool) |
| State direct contribution | Yes — ~9.3% of covered payroll annually appropriated from General Fund | No ongoing direct state contribution |
| Employer rate stability | Rates follow statutory schedule (more predictable) | Rates fluctuate annually with actuarial valuation |
| Social Security | Most CalSTRS members do not participate in Social Security for CalSTRS work | Many classified employees also participate in Social Security |
| Historical state cost relief | No equivalent Revenue Limit offset existed for CalSTRS | SB 6 O'Connell Offset (2001–2013) — now eliminated |
| Current district cost burden | ~19.1% of creditable compensation | ~28.6% of covered payroll (Schools Pool rate) |
| Source: CalSTRS and CalPERS employer rate schedules; LAO analysis. Rates approximate for 2024–25 fiscal year. | ||
Classified Staff: SB 6 History
What the problem was: In the late 1990s and early 2000s, CalPERS employer contribution rates for school districts were rising rapidly and unpredictably. Because classified employee pension costs are paid entirely from the district general fund (unlike CalSTRS, which receives a direct state appropriation), these cost spikes hit the same budget that pays classified wages and benefits — creating an unfair structural squeeze on classified employee programs and staffing levels.
What SB 6 did: Senate Bill 6 (O'Connell, Chapter 794, Statutes of 2001) created an automatic state offset mechanism tied to the Revenue Limit apportionment system — the predecessor to today's LCFF.
1. Baseline established: The state set a historical statutory baseline CalPERS employer contribution cost.
2. Upward adjustment: If the actual CalPERS Schools Pool contribution rate rose above the baseline, the state automatically added an upward adjustment to the district's Revenue Limit apportionment — effectively reimbursing the district for the excess cost with state funds.
3. Downward recapture: If CalPERS rates fell below the baseline (as happened when investment returns were strong), the state applied a negative adjustment — recapturing the savings back to the General Fund.
This was a true two-way automatic stabilizer, unique to classified employee pension costs.
The program in action — timeline:
Today's Budget Reality
Since the 2013–14 elimination of the SB 6 offset and the enactment of LCFF, California school districts are expected to absorb rising pension costs — both CalSTRS and CalPERS — directly from their ongoing general-purpose LCFF allocation.
✓ LCFF provides an annual COLA (Cost of Living Adjustment) increase if the state budget allows — but this is a general inflation adjustment, not a pension-specific offset.
✓ The state has occasionally passed one-time legislative budget relief to temporarily buy down CalSTRS or CalPERS contribution rates — but this is discretionary, not automatic.
✗ There is no longer a statutory, automatic, ongoing state mechanism that adjusts district revenue up or down based on actual pension cost fluctuations.
What this means for district budgets: A district with a $50 million classified payroll and a 1-percentage-point increase in the CalPERS Schools Pool rate faces a $500,000 cost increase with no guaranteed additional state revenue to cover it. This structural tension between rising pension obligations and fixed LCFF base funding is a major driver of budget deficits, position eliminations, and constrained classified wage negotiations at districts across California.
One-time legislative relief: In some years, the Legislature has appropriated one-time funds specifically to buy down employer pension contribution rates — providing temporary cost relief. These actions are visible in the state budget and are sometimes referenced as "pension stabilization" or "rate buy-down" appropriations. However, they are not permanent, not automatic, and do not restore the systemic two-way adjustment mechanism that existed under SB 6.