SACRAMENTO (AP) — California needs to pay an additional $4.5 billion a year for the next three decades to shore up its financially shaky teacher retirement fund, according to a report released Wednesday by the state’s nonpartisan budget analyst.
The nonpartisan Legislative Analyst’s Office declared that the California State Teachers’ Retirement System “may be the state’s most difficult fiscal challenge” and suggested that tackling the shortfall is perhaps more important than other state debts. It cited CalSTRS actuary figures that found that the pension fund would run out of money by 2044 without corrective action.
When combining the $4.5 billion with the current $1.4 billion annual contribution, the state would pay more for the pensions of retired K-12 teachers and community college instructors than it does for the entire University of California and California State University systems combined.
The bulk of that additional money will likely have to come from taxpayers because investments and teacher contributions aren’t enough.
The report was presented to lawmakers during a hearing on ways to address the pension fund’s unfunded liability, which stood at $73 billion as of June 2012.
“The CalSTRS liability is about double the governor’s so-called wall of debt, a collection of budgetary obligations the state has incurred in recent years to mitigate its significant budget problems,” analyst Ryan Miller said in a video released ahead of the hearing.
CalSTRS serves about 862,000 people, or about 2 percent of California’s population. It is funded by employees, school districts and the state.
Its shortfall dates to the dot-com boom in the late 1990s, when the state reduced its contributions and handed out more generous retirement benefits. Last fall, Gov. Jerry Brown signed sweeping pension changes that would largely affect new state and local government workers but also imposed salary caps and eliminated numerous abuses of the pension systems.
The report urged lawmakers to make changes soon because the fund’s liability grows faster than other debts.
It recommended that the Legislature treat the pension system the way it does other local retirement funds by giving communities flexibility over the amount of retirement benefits they want to give their school teachers and other education personnel.
By Judy Lin