What options and plans has the CalSTRS board considered to close the $64.5 billion funding gap?

Ask Jack Jack Ehnes

With thoughtful action, the funding shortfall can be managed. The Legislature and the Governor have the authority and the responsibility to resolve the long-term funding gap. The CalSTRS board began communicating the need for a funding solution to the Legislature and Governor in 2006 and has worked constantly since then to keep this issue in their focus.

During a public hearing, the Legislative Conference Committee on Public Pensions requested that CalSTRS develop examples of how the Defined Benefit Program could be sustained through different funding scenarios. In February of this year, CalSTRS submitted six funding scenarios to the Legislative Conference Committee. The scenarios addressed different annual rates of contribution increases shared between members, employers and the state. The Teachers’ Retirement Board has reviewed the scenarios but has not taken a position on any of the scenarios or the strategies presented.

What is needed to close the funding gap is an increase in contribution rates which can be gradual, predicable and fair to all parties; occurring incrementally over time. This approach is reflected in the legislatively requested funding scenarios. However, if the state fails to adopt a responsible funding solution, the costs and risks to the state General Fund only increase.