CalSTRS Board Opposes State Budget Proposal Threatening Inflation Protection Program

News release

 SACRAMENTO, CA  – The Teachers’ Retirement Board voted today to oppose the Administration’s state budget proposal affecting the CalSTRS inflation protection program for retirees. The proposal would:

  • Unconditionally guarantee the purchasing power benefit at the current 80 percent level, regardless of the rate of inflation
  • Reduce the state’s contribution to the program from the current 2.5 percent of payroll to 2.2 percent of payroll

The board members’ opposition to the proposal centered on the significant probability, according to outside actuarial and fiduciary counsel, that the guaranteed benefit might exceed available resources in the future.

“We’re concerned about this proposal and its threat to the long-term stability of the trust fund,” said Dana Dillon, board chair. “While this benefit would be assured for our members, the funding would not be assured and could put the trust fund at risk.”

The state budget proposal must go through the legislative process, which includes hearings and votes by the Legislature before the Governor signs the budget into law. The annual deadline for enacting the state budget is June 15.

With a $159 billion investment portfolio, the California State Teachers’ Retirement System is the second-largest public pension fund in the United States. It provides retirement, disability and survivor benefits to California’s nearly 800,000 public school educators and their families.