CalSTRS Files Suit to Restore Retiree Funding

News release

The California State Teachers’ Retirement System has filed a lawsuit against the state to restore a $500 million contribution cut in Senate Bill 20x. The contribution supports supplemental payments made to approximately 63,000 retired educators and their survivors. These quarterly payments are made when inflation erodes a recipient’s monthly benefit below 80 percent of its original consumer purchasing power.

The suit was filed with Sacramento County Superior Court on October 14, 2003, by CalSTRS litigation counsel Olson, Hagel & Fishburn, a Sacramento law firm. Named as respondents in the suit by virtue of their official capacities are Steve Peace, Director of the California Department of Finance and Steve Westly, California State Controller. Previously, the suit had been filed in the state Supreme Court and the Third Court of Appeal, both of which declined to hear the case.

The complaint seeks the invalidation of SB 20x because it provides no assurance the withheld amount will be returned and because the law’s implementation will jeopardize the capability of CalSTRS to make the supplemental payments in the future.

While current supplemental benefit recipients and those in the near future will not be affected by the missed contribution, the Teachers’ Retirement Board opposed SB 20x due to the long-term threat it presents to the program.

Therefore, since January 2003, when SB 20x was introduced, the board has sought a legislative solution to its objections to the law. Assembly Bill 265, authored by Assemblymember Gene Mullin (D-S. San Francisco), resolved the board’s concerns. AB 265 would eliminate the total $559 million payment due this year and provide full and certain return of the total payment. AB 265 was held in the Senate Appropriations Committee at the end of the first half of the legislative session. CalSTRS will continue to seek passage of the bill’s provisions in the second half of the legislative session. Absent passage of AB 265, the Teachers’ Retirement Board will pursue this litigation to ensure the contribution is made in full.

“We are disappointed to have to resort to litigation to restore this payment,” said Gary Lynes, chair of the Teachers’ Retirement Board. “The board is sensitive to the state’s very real budget difficulties. But in the end, our focus must be on California’s educators–on what’s best for them, not just now, not in the near term, but forever.”

Click here for a copy of the Superior Court complaint.