Last week the California Auditor’s Office added Cal-STRS, the state-wide teachers’ pension/retirement program, to an ever-growing list of critical issues facing our California legislature.
State Auditor Elaine Howle put the State Teachers Retirement System (Cal-STRS) on the state’s high-risk list because she found that the nation’s largest teacher pension fund would not be able to pay the costs of teachers’ retirement benefits beyond the next 30 years.
Not a New Problem
Cal-STRS reported last March that it had only 70 percent of the assets it needed to fund the retirement costs for its 852,000 members and their families.
Cal-STRS estimated the shortage to be around $56 billion, an average of $65,700 per member, which is almost as much as the 2009-10 average California teacher’s salary of $67,932. The average Culver City Unified School District teacher’s salary is $64,343.
The STRS program is funded by contributions from both the employee and employer based on a percentage of the employee’s salary. The Culver City Unified School District and its employees each pay in a different set percentage: The CCUSD pays in 8.25 percent; while the teachers kick in 8 percent of their salaries. One of the long-standing problems inherent to the program is that those percentages have not changed in decades.
But it must also be noted that the CCUSD also continues to carry over on its books, year after year, an unfunded retiree health benefits liability of over $11.3M.
Calls for Change
Both the Cal-STRS trustees and Gov. Brown have called for changes in its funding to assure its long-term sustainability. Unlike the other large state and local government pension system, called Cal-PERS, which can modify its members’ contributions on its own, state legislative approval is required for changes to Cal-STRS funding rates.
Almost One-Third Down
Back in 2001, Cal-STRS reported it had 98 percent of the assets it needed. But with the increase of locally negotiated compensations and especially its stocks and bonds investment return suffering from the downturn, the fund’s value has been reduced by almost 30 percent.
Retirement Nest Egg
The latest Cal-STRS retirement figures show that in 2009-10 more than 15,000 members retired at the median age of 61.8 after an average of 26 years of service. Cal-STRS fund was obligated to pay out a monthly average of $4,256 to each retiree. That’s a retirement nest egg of just over $51,000 a year.
That’s more than what some full-time working teachers make in 28 other states.
Ricardo Duran, a Cal-STRS spokesman, wrote by email, “The report underscores what Cal-STRS officials have been saying for years. The issues are long-range ones, but the longer it takes to develop a plan, the more costly will be the solution.”
Mr. Laase may be contacted at GMLaase@aol.com
