By Dale Kasler The Sacramento Bee
Published: Saturday, Feb. 6, 2010 – 12:00 am | Page 3A

CalSTRS officials say controversies at the state’s other big pension fund, CalPERS, will complicate the already difficult task of persuading the Legislature to raise pension contributions for teacher retirements.

Staggered by a 25 percent loss in the last fiscal year, the board of the California State Teachers’ Retirement System began crafting a strategy Friday to petition lawmakers for higher rates.

The investment loss left CalSTRS some $42 billion underfunded as of last June – an estimate of how much additional cash the fund needs to pay its bills over the next 30 years. The amount of underfunding doubled in about 12 months.

Although there’s no immediate crisis, CalSTRS Deputy Chief Executive Ed Derman said the financial problem will only worsen the longer the fund waits to ramp up contributions. CalSTRS gets more than $6.6 billion in annual contributions from the state, school districts and teachers. About $1.6 billion of that comes from the state.

Unlike CalPERS, which has the authority to impose rate hikes, the teachers’ retirement system must get permission from the Legislature for an increase from any of its three funding sources.

Derman and other officials said the political climate for an increase is daunting, given that the state is already facing a $20 billion budget deficit.

In a written report to the board, Derman, Chief Executive Jack Ehnes and other staff members said the controversy over so-called placement agents at the California Public Employees’ Retirement System could make the political situation even dicier.

Although it didn’t identify him by name, the staff report noted that former CalPERS board member Alfred Villalobos earned about $60 million in commissions representing clients that got investment deals from CalPERS. It also noted that former CalPERS CEO Fred Buenrostro has gone to work for Villalobos.

Spokesmen for CalPERS didn’t respond to requests for comment on the report.

CalSTRS officials said taxpayers might not be sympathetic about public employees’ retirements. Recently retired teachers get an average monthly pension of $4,200 – a sum that might seem generous even though teachers don’t collect Social Security.

“The average Californian doesn’t get this kind of benefit,” said board member Peter Reinke. Taxpayers might reason that increased funding for pensions would take dollars away from education itself, he said.

Ehnes said political realities mean CalSTRS should wait a year before going to lawmakers. Fund officials should spend 2010 working with teachers unions and others to start building the political case before the Legislature, he said.

“This needs to be the year we clearly articulate the financial condition” of CalSTRS and find common ground with teachers, he said.

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