WALNUT CREEK -- While surrounding school districts drown in a sea of red ink and prepare thousands of pink slips, the Walnut Creek School District is giving its staff a raise.

Drawing on its healthy reserve funds, the district is giving 3 percent raises to its teachers, classified staff and district managers. The raise is retroactive to July 2010 and is the first for district teachers in three years.

It makes Walnut Creek one of only a few districts statewide to increase teacher pay and not resort to layoffs.

"When we had our ratification (meeting) and we announced the 3 percent salary increase, I watched the teachers and their jaws just dropped," said Kandi Lancaster, Walnut Creek Teacher Association president. "Then there was a three-second pause and then they all got out their calculators."

The district's 170 teachers also will receive more money for their health care benefit. The district pays a small percentage compared with other districts, Lancaster said. Full coverage for a family on Kaiser costs a Walnut Creek district teacher about $1,300 a month, she said.

"Many teachers have had their salaries decreasing because of increased health care cost, so it's a huge win," Lancaster said.

The raises are possible because the Walnut Creek district stockpiled its reserves, which, before the raises and compensation increases, hovered around 30 percent of its $23 million budget: $7 million. After the changes, Walnut Creek's reserves are 28 percent of budget, much higher than the state's recommended 3 percent, said Marcus Battle, the district's chief business official.

Walnut Creek has cut $3 million from its once $26 million budget over the past three years. The district stuck with those cuts and didn't restore anything from year to year. That move along with enrollment being up by 100 students brought in unexpected revenue the district socked away, Superintendent Patty Wool said.

Lancaster credits part of the new contract to association members learning about the district's finances and pushing to use the reserves. She called the pact a catch-up for the past few years.

"We continue to see student success grow and we have been doing that with increased class sizes and a heavier workload," Lancaster said. "Finally, they have pulled the umbrellas out and all the sacrifices we have made have been recognized."

With the state superintendent of education declaring a public emergency for the school system, teachers getting raises at this point is rare, said Mike Myslinski, California Teacher Association spokesman.

"It's unusual because of a district having reserves of that much after years of cuts, most districts are down to the bare bones and their reserves are nearly gone," he said. Walnut Creek school district teachers remain near the lowest paid in the county, with new teachers starting at $41,750 a year, Lancaster said.

Wool is quick to say that these raises while well-deserved likely will not become the norm.

"We don't anticipate this for the future," she said.

No furlough days or layoffs are planned for next school year. But if Gov. Jerry Brown's proposal to extend tax increases fails it could mean school districts see more of a hit than anticipated.

The district board has decided to use reserves if more cuts come down the pike, Wool said.

"We will use some reserves to cover anything else for next year but after that we would have to cut very significantly. It's a calculated risk to use the reserves," she said.

Contact Elisabeth Nardi at 925-952-2617. Follow her at Twitter.com/enardi10.