State Must Act to Fund CalSTRS

Senator Mimi Walters
California State Senator, 37th Senate District

The California State Teachers’ Retirement System (CalSTRS) liability is growing by $22 million per day, and California must act now before the shortfall becomes even more catastrophic.  In response to this systemic deficit, I have introduced SB 984, new legislation that could appropriate up to $2 billion in emergency funding over the next two years to CalSTRS. In addition, the bill forms a working group to look at long-term solutions, as suggested by Governor Jerry Brown in his 2014-15 Budget proposal.

Yesterday, in a joint hearing of the Senate and Assembly PERS Committees, when asked if any appropriations this year might provide relief, CalSTRS Deputy CEO Ed Derman said that “anything is helpful.” California Teachers Association (CTA) representative, Jennifer Baker, added, “We support funding solutions for this year, and any long-term funding solutions.”

CalSTRS has a $71 billion unfunded retirement liability and so far no one has taken any meaningful action.  The Governor and legislative Democrats have all publicly expressed concerns about finding a solution and that is a good start.  The Legislature has held multiple informational hearings, but has yet to implement a solution.  According to CalSTRS CEO Jack Ehnes, the liability borne by the pension plan is growing by $22 million daily, and unless the Legislature acts, the fund will be insolvent by 2043.  My proposal provides $1 billion now, increasing to $2 billion if excess revenue is collected in the state general fund.  The savings to taxpayers are undeniable: $1 billion added to the fund now, saves almost $9 billion over 30 years, and $2 billion now saves taxpayers $17.5 billion.

SB 984 also creates a working group to recommend solutions to the Legislature for long-term funding remedies for CalSTRS’ unfunded pension liability and evaluate the state’s long-term role as a direct contributor to the pension plan.  The working group would include, but is not be limited to, representatives from the Governor’s administration, the Legislature, school districts, teachers, and CalSTRS.

CalSTRS serves California’s 862,000 public school educators and their families from the state’s 1,600 school districts, county offices of education and community college districts. Teachers pay into the fund each year until they retire.  The plan is a legal contract with the State of California, protected by the California and U.S. Constitutions. As the pension plan guarantor, or sponsor, the state is obligated to ensure that benefits are paid and contributions are received. It is our responsibility as legislators to protect the funds’ investments so our hardworking teachers receive the retirement they have been promised.

Failing to fund the teachers’ retirement program now places an undue burden on California families, school districts, teachers, and generations of future Californians. In addition, as the unfunded liability grows, the cost of retiring this debt will severely impact funding for other government services such as education, public safety, court system, health care, and the social safety net.

Last year the Governor successfully campaigned to raise taxes, creating a budget surplus. That is one-time money that should be used to pay down current debts, not for creating new programs.  The Legislative Analyst’s Office (LAO) says CalSTRS needs $4.5 billion annually over the next 30 years to close the funding gap.  We must take advantage of the opportunity before us now in order to address California’s short and long-term fiscal realities, or we will face, once again, huge budget and pension shortfalls, which is not acceptable.

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