The California State Teachers Retirement System (CalSTRS) funding crisis is real, immediate, huge — and to date ignored by California’s political leaders. In 2013, the state and school districts provided CalSTRS with less than half of its Annual Required Contribution (ARC), which is the minimally required pension contribution. The unpaid amount — more than $3 billion — was the country’s largest single skipped pension contribution and accrues interest at 7.5% per annum.
It’s also just the latest in a string of skipped contributions when, by its own math, CalSTRS needs 30 years of un-skipped, fully paid ARC’s in order to meets its obligations. The problem needs to be addressed now.
Yesterday, I sent the following letter to Governor Jerry Brown with hopes that he will address this issue in his proposed state budget.
An Open Letter to Governor Jerry Brown
Dear Governor Brown,
Nearly a year has passed since the California State Teachers Retirement System (CalSTRS) asked you and the legislature to address a pension deficit for which it seeks a 30-year $240 billion cash injection, starting with $4.5 billion per year.
It’s easy to understand why you and the legislature have failed to act. After all, CalSTRS won’t run out of money while you and they are in office. But if CalSTRS’s deficit is not addressed, then the next generation will be forced to spend at least $45 billion per year meeting CalSTRS’s bills.
In other words, either our generation starts paying $4.5 billion per year towards promises we made for services we received or we force the next generation to pay ten times as much for promises they didn’t make and services they won’t receive.
That’s not hyperbole; that’s math. It’s also injustice.
Governor, it’s long past time to act. By not addressing CalSTRS, California has already become the largest “deadbeat” state government, a term coined by The New Yorker to characterize governments not even paying minimally required pension contributions. Every day of additional delay adds millions of dollars to the next generation’s burden. If you don’t act, you are effectively defunding their classrooms, cutting their public services, and raising their taxes.
The next generation isn’t a large donor to political campaigns and is hardly aware of the consequences in store for them if you fail to act. That’s why they need political leaders with the courage to protect them. If not you, who?
End the financial assault on the next generation. Act now on CalSTRS.
Govern For California