By Daniel Borenstein, staff columnist
Posted: 05/17/2014 09:00:00 AM PDT
Gov. Jerry Brown last week proposed the first substantive strategy to shore up the state’s woefully underfunded teacher pension plan.
For more than a decade, lawmakers have ignored the increasing shortfall. Consequently, the California State Teachers’ Retirement System is now $74 billion underfunded, holding only 67 percent of assets it should have.
Brown now wants to start paying down the debt this year. But he would stretch the installments until 2046, meaning it would take 32 years to restore full funding and that the debt would continue growing for the first 12 years.
That’s not fiscally responsible; it’s merely less irresponsible than what lawmakers do now. Some legislators don’t get it. Senate President Pro Tem Darrell Steinberg, D-Sacramento, on Wednesday suggested lengthening — not shortening — the repayment period.
CalSTRS serves 868,000 public school educators and their families. To pay pensions, the retirement system depends on contributions from employees and employers, in this case the state and school districts, and investment returns on that money.
When the assets fall short, more contributions should be injected. But, unlike other pension systems, CalSTRS cannot increase those contribution rates on its own. It must go begging to the state Legislature and governor to do so, politicizing what should be an actuarial decision.
Since the start of the century, lawmakers have ignored the need to raise rates as CalSTRS funding has slipped further behind. Because of that underfunding, benefit increases just before the turn of the century and investment losses during the dot-com bust and the Great Recession, the system has declined from full funding around 2000 to the current 67 percent.
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