Setting a Standard for the Next 100 Years
2013 was an especially significant year to CalSTRS as we celebrated 100 years of service to California’s educators. Last year kicked off with a newly designed website and a video that highlighted accomplishments of the past century.
New pension legislation, the California Public Employees’ Pension Reform Act of 2013 (PEPRA), made many changes to the Defined Benefit Program, including the creation of two benefit structures, CalSTRS 2% at 60 and 2% at 62. Member services continued to grow with the opening of our latest member service center in Santa Clara.
The Teachers’ Retirement Board voted in April 2013 to begin the process of divestment from firearm companies that manufacture weapons registered as illegal in California. Many strides on corporate governance engagement issues were made. In fact, within the public pension community, CalSTRS has one of the longest-standing policies on corporate governance issues dating back to 1978.
CalSTRS’ investment team won multiple awards and recognition for their outstanding performance. The fiscal year returns came in at 13.8 percent and the fund’s portfolio was valued near a historical high of $176 billion by the end of December.
Perhaps most significant to the fund, CalSTRS submitted a report to the Legislature in February 2013, Sustaining Retirement Security for Future Generations: Funding the California State Teachers’ Retirement System. The report provides the Legislature with a range of sustainable funding strategies that could be employed to secure the long-term funding needs of the Defined Benefit Program.
CalSTRS’ number one priority is securing a long-term funding strategy that protects the state General Fund and upholds the state’s promise to teachers. Unlike other pension plans in California, the Teachers’ Retirement Board lacks the authority to raise contribution rates and must instead rely upon the Legislature and the Governor for remedy. In 2013, our staff made considerable effort with every state legislator to educate her or him on the status of CalSTRS funding.
For nearly 10 years CalSTRS has been working to demonstrate the urgent need for the Legislature and Governor to craft a long-term funding strategy to protect California’s teachers and the state’s general fund.
On January 9, 2014, Governor Brown introduced California’s FY2014-15 budget plan. Although the budget does not commit more money to address the CalSTRS funding shortfall, the Governor does suggest he will begin working with the Legislature, school districts, teachers and the pension system to enact a plan in 2015-16 that will fully fund the system in the next 30 years.
Having a formal budget document that commits to a funding plan is a positive step. This will certainly help give direction and energy to work with the Administration, legislators and stakeholders this coming year to develop and ultimately finalize a plan. I am very pleased to see this language included.
For CalSTRS, the past 100 years offer testament to the integrity of our fiduciary service and the prudence of our financial performance. As 2014 begins, we have before us an opportunity to set a standard for the next 100 years; a standard where the quality of our investment is based on its contribution to the future, as well as its present value.