Why hasn’t CalSTRS submitted proposed legislation to the legislature to deal with the unfunded liability? The legislature seems to be unwilling to act on its own, and the problem grows daily.

Ask Jack Jack Ehnes

The Legislature and the Governor must tackle the challenge of crafting a funding plan for the CalSTRS Defined Benefit Program. Unlike other California pension plans, the CalSTRS board lacks the authority to raise contribution rates – only the Legislature and Governor have the authority to do so. It is CalSTRS’ responsibility to bring attention to the needs of the fund and to provide any technical assistance to the Governor and Legislature as they enact a solution to provide the long-term viability the fund is in need of.

For nearly 10 years, CalSTRS has made considerable effort to call attention to its unfunded liability, which is the difference between projected future assets and projected future benefit payments, and the risk of not addressing it. Securing a plan to shore up CalSTRS’ $70 billion unfunded liability is our most pressing concern. As a result of our efforts, the Legislature last year passed Senate Concurrent Resolution 105 which establishes a framework for a funding strategy.

The resolution urges CalSTRS to collaborate with affected stakeholders to develop at least three funding options and submit them to the Legislature, which we did. In February of this year, CalSTRS submitted its detailed report to the Legislature, Sustaining Retirement Security for Future Generations: Funding the California State Teacher’s Retirement System.

The report provides a range of alternatives (as requested in SCR 105), developed in concert with stakeholders, to offer policy makers a starting point for their legislative action. The funding options presented consider the implications of gradual, incremental contribution increases necessary to close the $70 billion funding gap and secure the long-term needs of the fund.

The initial reactions to the report from the Legislative Analyst’s Office and various editorial pages have been very encouraging. Furthermore, our extensive legislative visits during the last several years have resulted in constructive recognition of the need to stabilize CalSTRS funding. While these initial actions are promising directions, we recognize that there remains no formal funding plan proposal introduced by the Legislature.

At this time, the state must act to adopt a responsible funding strategy that will protect the state General Fund and uphold the state’s promise to teachers.