California Teachers’ Pension System Expands Credit Enhancement Program

News release

 Sacramento, CA  – The California State Teachers’ Retirement System has expanded its credit enhancement program from transactions only within California, Oregon and Nevada to transactions nationwide. Entities throughout the U.S.seeking ways to improve their rating to qualify for bond money may now benefit from CalSTRS’ credit enhancement program.By making a lower interest rate available, the program may help communities build facilities and create new jobs.

“Credit enhancements are an excellent way for community projects to obtain lower-cost financing, easing the strain on local budgets while developing their communities,” said Christopher Ailman, chief investment officer of CalSTRS. “And CalSTRS benefits by generating fee revenues for our investment portfolio.”

CalSTRS loans its credit rating to municipalities, other local government entities, service districts, non-profit organizations and state agencies. Examples of entities that have used the CalSTRS credit enhancement program for their projects include the Port of Long Beach, the City of Vallejo and the Pasadena Rose Bowl.

Through a letter of credit, line of credit or liquidity enhancement, the CalSTRS credit enhancement program enables issuers of municipal debt to substitute their lower credit rating for CalSTRS’ higher credit rating. This substitution allows the organization access to the capital markets and permits it to pay a lower interest rate on its debt instrument to investors.

CalSTRS partners with banks and serves in either a co-front position or in a second-loss position. The CalSTRS credit enhancement program conducts its business in the short-term, variable rate municipal bond market. The primary objective of the program is to earn fee income through the enhancement of high quality, diversified municipal financings, such as tax-exempt bonds, industrial development bonds, tax and revenue anticipation notes and commercial paper.

Below are features of the CalSTRS credit enhancement program.

  • CalSTRS enjoys a high, consistent credit rating: a AAA rating from Moody’s and Fitch and a AA+ rating from Standard & Poor’s.
  • The CalSTRS program has a stable 10-year track record and has never suffered a default.
  • CalSTRS paper is very attractive and sought after in the marketplace.
  • CalSTRS fees are competitive.

Entities interested in CalSTRS credit enhancement or to find out about requirements, may contact

With a $133 billion investment portfolio, CalSTRS is the third-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California’s public school teachers from kindergarten through community college, serving more than 755,000 members and their families.