CalSTRS Prevails in Suit to Recover $500 Million State Payment

News release

 Sacramento, CA  – Sacramento County Superior Court Judge Judy Holzer Hersher today ruled in favor of California State Teachers’ Retirement System in its lawsuit against the state to restore a $500 million state contribution withheld on July 1, 2003.

The judge agreed with CalSTRS in its argument that the law obligating the state to make the contribution is “clear and unambiguous.” With this ruling, the court proceedings are concluded, avoiding a hearing that had been scheduled for July 15, 2005.

The missed 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 in the Sacramento County Superior Court on October 14, 2003, by CalSTRS litigation counsel Olson, Hagel & Fishburn, a Sacramento law firm. The complaint sought to invalidate SB 20x because it violated the vested rights of teachers and retirees while providing no assurance the withheld amount would be returned and because the law’s implementation would jeopardize the capability of CalSTRS to make the supplemental payments in the future.

“We are relieved to have the court agree with us and now we can put this issue behind us. Resorting to litigation was done reluctantly,” said Carolyn Widener, 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 to view the ruling.

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.


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