Are media reports that suggest the state needs to increase annual funding to CalSTRS by $4.5 billion for the next 30 years accurate?

Ask Jack Jack Ehnes

Although this is an accurate statement based on current projections, achieving adequate funding can occur several ways that would be phased in over time and fair to all parties involved. Many of the media stories follow recent developments on how the Legislature is beginning to address the funding needs of CalSTRS.Specifically on February 14, 2013, CalSTRS submitted its report of possible funding strategies, Sustaining Retirement Security for Future Generations: Funding the California State Teachers’ Retirement System, to the Legislature as requested by Senate Concurrent Resolution 105.

The report, developed with input from affected stakeholders, identifies funding options and illustrates the implications of gradual, incremental contribution increases necessary to close the $70 billion funding gap and secure the long-term needs of the Defined Benefit Program. Another recent report from the Legislative Analyst’s Office also recommends adoption of a funding plan for CalSTRS by 2014. This too, has been covered in recent media reports.  

CalSTRS core benefits (retirement, disability and survivor benefits) are guaranteed by the U.S. and California constitution. What is in question is how benefits will be funded 30 or more years from now. Unlike other public pension plans, the CalSTRS board does not have the authority to raise contribution rates, only the Legislature can do that. We hope the adoption of legislation occurs in the 2013-14 session, as intended in the resolution, to stem the growing cost of a solution. CalSTRS stands ready to assist the Legislature and Governor in providing any information needed to enact a funding strategy.