In May 2012, you responded to a question about what you were doing to get CalSTRS on solid financial footing. Any update? This includes the board’s actions as well.
By law CalSTRS has a fixed contribution rate, thus the responsibility to adopt a funding solution rests with the Governor and the Legislature—not the CalSTRS board. Moreover, only the Legislature and the Governor can change the benefit structure, not the board. As a result, CalSTRS has been working for some time to raise awareness of the Legislature and successive governors of our funding shortfall, the cost of waiting to address it and the ultimate risk failing to do so presents to the state’s General Fund.
Today, the latest valuation, June 30, 2011, shows the Defined Benefit (DB) Program as 69 percent funded and carrying a $64 billion funding gap. CalSTRS is confident that this shortfall can be managed, but it will require increased contributions, which can be gradual, predictable and fair to all parties involved.
Recently, Senate Concurrent Resolution 105, which was adopted by the Legislature in August 2012, establishes a framework for development of a funding plan. The resolution urges CalSTRS to collaborate with affected stakeholders and submit at least three options for a funding solution to the Legislature by February 15, 2013. In the resolution, the Legislature states its intent to address CalSTRS funding needs in the 2013-14 legislative session.
On February 14, 2013, CalSTRS submitted its report, Sustaining Retirement Security for Future Generations: Funding the California State Teachers’ Retirement System, to the Legislature following the board’s review. The report, developed with input from affected stakeholders, provides the Legislature with a range of sustainable funding strategies to secure the long-term funding needs of the DB Program. The report’s funding options consider the implications of gradual, incremental contribution increases necessary to close the $64 billion funding gap and secure the long-term needs of the fund. You can read the report if you click the link in the report title above.
Since 2006, CalSTRS and the board have been educating our membership and the Legislature on the need to develop a responsible funding strategy that protects the state General Fund and upholds the state’s promise to educators, and has repeatedly informed the Legislature and the Governor that CalSTRS is ready to assist the Legislature, the Governor and affected stakeholders in their development of a plan to address the long-term funding needs of the program. We hope the information included in the SCR 105 report helps drive a long-term funding strategy for CalSTRS.