Blog entry Jack Ehnes

Your CalSTRS Pension Benefits the State Economy

The CalSTRS Defined Benefit pension provides secure retirement income that our retired members and their beneficiaries rely on, but they’re not the only ones. Communities throughout the state also realize an economic benefit from the state’s nearly 214,000 retired educators.

On average last year, CalSTRS members retired at age 62 after more than 25 years of service with a pension that replaced about 60 percent of their salary. That benefit is crucial for their retirement security as members receive no Social Security benefits for their CalSTRS-covered employment.

Research shows reach of benefit dollars

In 2007, CalSTRS commissioned research with the Applied Research Center at the California State University, Sacramento that shows how pension dollars are leveraged throughout the state. Statewide, CalSTRS benefit recipients received $6.03 billion in payments during 2006, according to the study. That amount has since grown to more than $9.4 billion in 2010. The economic ripple effect, in the form of job generation, as those benefits were spent, totaled $9.22 billion in the 2007 study. 

The findings showed that CalSTRS benefits to the state’s retired educators are an economic engine in all of California’s 58 counties, with the highest relative impact being felt in rural counties. The California economy gained $6.71 for every single dollar invested in pensions by employers and taxpayers, according to the study. Each invested dollar also generated 44 cents in government revenues.

I’m sure the impact of today’s spending by CalSTRS retirees has increased similarly, but the importance of that spending is greater still, given the drastic economic downturn of 2008-09 and the resulting recession. In these sluggish economic times, I believe the stability of the pension payments helps cushion local economies.

Funding for benefits

Funding for CalSTRS is a partnership among the educators, the school districts they work for and the state of California. All three pay into the retirement system but investment returns and member contributions account for nearly three-fourths (73 percent) of every benefit dollar paid by CalSTRS.

Fact Sheet: CalSTRS Fundamentals

 

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