By Tim Herdt
Ventura County Star
Posted May 6, 2011 at 7:55 p.m., updated May 6, 2011 at 9:33 p.m.
SACRAMENTO — An economic research firm hired to produce data that could justify an expected initiative campaign to scale back public-employee pensions uncovered what its authors called a surprising finding in its report issued this week: Teachers receive relatively modest pensions and contribute a sizable chunk of their earnings to fund their retirement benefits.
“My reaction was, as we try to attack problems in the pension system, I don’t think it’s going to be helpful to attack CalSTRS (the state teachers’ retirement system) by reducing the benefits package,” said former state Finance Director Mike Genest, one of the authors of the study. “When compared to other public pension systems, it is far less generous.”
The report sought to compare retirement benefits and other compensation of public workers in California with those received in the private sector and by federal government employees.
Generally, the report concluded that public sector retirement benefits in California “are much richer for those in the private sector for full-career employees,” but that benefits for those who work less than a full career are in some cases less than retirement benefits in the private sector.
The clear exception was teachers, said Brad Williams, a former economist for the Legislative Analyst’s Office who also is a member of the research team.
“When we did the analysis of benefits, it was striking how much less generous it is compared to the other public systems,” Williams said.
CalSTRS spokesman Ricardo Duran said those findings should not have come as a surprise.
“We’ve always known that our plan provided a modest benefit,” he said. “We are grateful that they got it.”
Duran noted the basic retirement formula for teachers’ pensions is 2 percent of their salary times years of service, which can be taken at age 60. Teachers pay 8 percent of their salary into the pension fund each year. Local school districts pay in 8.75 percent and the state pays another 2 percent..
Duran said the structure of the state teachers’ retirement system is designed to yield retirement benefits for a career teacher equal to 60 percent of his or her final salary. Financial planners typically advise that people need to assemble retirement income equal to about 85 percent of their working income to ensure a secure retirement.
Since teachers do not pay into or receive Social Security benefits, Duran said they are advised early in their careers that they need to supplement their pension benefits by putting away money throughout their working life into individual retirement savings plans.
The median benefit for the 213,952 retired teachers who receive pensions from CalSTRS is $49,000 a year, or slightly more than $4,000 a month, he said.
The study was financed by a nonprofit group called the California Foundation for Fiscal Responsibility. Its president, Marcia Fritz, said the group received a grant from a source she would not identify to produce the research.
The group is associated with a political action organization California Pension Reform, which is expected to soon file a ballot initiative designed to reduce public employee retirement benefits.
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