Dear Editor,
Regarding the column headlined
”
Resentment over ungodly public pensions growing
”
published on June 11, columnist has it wrong.
He writes that CalSTRS recent investment performance has
”
forced state and local governments to fork over far more to fund
pensions than they did, say, 10 years ago.
”
He got the facts wrong. The state of California’s contribution
rate today to CalSTRS is half of what it was in 1997.
Dear Editor,
Regarding the column headlined “Resentment over ungodly public pensions growing” published on June 11, columnist has it wrong.
He writes that CalSTRS recent investment performance has “forced state and local governments to fork over far more to fund pensions than they did, say, 10 years ago.” He got the facts wrong. The state of California’s contribution rate today to CalSTRS is half of what it was in 1997.
There are four funding sources for the teachers’ retirement systems: (1) educators contribute 8 percent of their salary; (2) school districts contribute 8.25 percent of payroll; (3) the state contributes 2.07 percent of annual payroll (it was 4.6 percent in 1997) and (4) these contributions generate investment returns on those contributions, which have historically contributed 60 to 63 percent of the cost of providing benefits. Teachers and school districts have not had an increase in contributions for more than 20 years.
Since 2006, CalSTRS has been clear that it is facing a future funding shortfall. A solution must be realistic and found soon. Pension obligations aren’t due for decades and long-term investments can tolerate market volatility. CalSTRS well-diversified investment portfolio averaged 8.6 percent annual returns for the past 30 years, which includes the minus-25 percent loss from the 2008 global market crash.
The unfunded liability can be managed without eliminating the Defined Benefit pension.
Research by the National Institute on Retirement Security shows that for a given level of benefit, a defined benefit plan is about half as costly as a defined contribution, 401(k)-style, plan.
CalSTRS looks forward to working with its stakeholders as well as the next governor, the legislature as they develop a funding plan that is fair to all.
Jerilyn Harris, CalSTRS Board Chair
