CalSTRS Moves Closer to Restoring Retiree Funding
Sacramento, CA – A bill that would repay over time a $500 million state contribution that has been withheld from the California State Teachers’ Retirement System was passed by the Assembly Committee on Public Employees, Retirement and Social Security this morning on a unanimous vote, bringing CalSTRS one step closer to recovering these funds without continued litigation.
The committee vote on AB 55 (Mullin) concerns a withheld contribution that supports supplemental payments to approximately 63,000 retired educators and their survivors. These quarterly payments are made from CalSTRS’ Supplemental Benefit Maintenance Account to retirees when inflation erodes their monthly benefit below 80 percent of its original consumer purchasing power.
Two years ago, Senate Bill 20x amended the law to withhold $500 million of the annual contribution from the total amount due in the 2003-04 fiscal year. AB 55 would restore the missed contribution in payments over the next five years. 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.
In addition to supporting AB 55, CalSTRS previously filed suit in October 2003 to recover these funds in Sacramento County Superior Court. The complaint sought to invalidate SB 20x on the grounds that it violated an enforceable commitment to the state to pay those funds and jeopardized the capability of CalSTRS to make the supplemental payments because there is a possibility that the funds will never be repaid. The second hearing on CalSTRS’ Motion for Summary Judgment will be heard in the Sacramento County Superior Court on Friday, April 22.
Jack Ehnes, Chief Executive Officer of CalSTRS, said of today’s vote, “We’re encouraged by this positive step toward restoration of the state’s contribution and anticipate a successful conclusion to our efforts. Our goal has always been to use the legislative process, rather than litigation, to get the funds due our retired members.”
CalSTRS, with a $125 billion portfolio, is the nation’s third largest public pension fund. It administers retirement, disability and survivor benefits for California’s public school educators in grades kindergarten through community college, serving more than 755,000 members and benefit recipients.