Ed Derman, the deputy chief executive officer at CalSTRS, is responding to the Nov. 8 editorial "Brown needs to right the ship of CalSTRS," which stated: "A more sophisticated and independent board and an outside audit of pension spiking are just what the teachers' retirement fund needs …"

Since the recession, when the teachers' retirement fund lost $43.4 billion in value, CalSTRS has said the fund cannot invest its way back to financial health. The discussion of CalSTRS' funding situation has picked up steam since, as nonpartisan entities such as the Legislative Analyst's Office and Bureau of State Audits raised similar concerns, often using CalSTRS' analyses and cost projections.

We commend Gov. Jerry Brown and legislators for their recent focus on pensions. It's going to take their combined leadership to develop a plan to address the California State Teachers' Retirement System's $56 billion unfunded liability – the gap between current assets and long-term liabilities. CalSTRS is unique in that the sole authority to set contribution levels rests in the hands of the governor and Legislature, not with its own board. This is why the recession affected CalSTRS differently than other pension systems. Meanwhile, CalSTRS continues to tighten its anti-spiking controls.

For years, CalSTRS focused on building strong operational systems to deliver timely and accurate benefits. In September, we strengthened our internal controls by forming an anti-spiking "Compensation Review Unit" and implementing an anonymous toll-free pension abuse reporting hotline.

We agree with The Bee editorial that additional work to prevent pension spiking must be done, which is why we strongly support state Controller John Chiang's planned independent audit of CalSTRS' efforts. We have also supported legislative efforts to strengthen anti-spiking rules and look forward to working with the governor and the Legislature to codify changes that will result in clearer direction for compliance.

As our elected officials pursue pension reforms, it's time for them to work with CalSTRS and other stakeholders to develop a funding plan that includes gradual, predictable and fair contribution increases. CalSTRS members contribute 8 percent of their salaries to fund their pensions, while their employers contribute 8.25 percent. These rates haven't changed since 1972 and 1990. The state's contribution of 2.541 percent was reduced from 4.607 in 1998.

The LAO recently reiterated what CalSTRS has been saying for some time – the longer a funding solution takes to implement, the more it will cost. CalSTRS has provided the administration and Legislature with multiple scenarios to address the unfunded liability, all of which indicate the fund will be depleted in approximately 30 years unless a long-term funding strategy is put in place.

We understand that pension reform needs to be considered, but delays in developing a long-term CalSTRS funding plan will result in further increased costs to state and school employers.

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Ed Derman, the deputy chief executive officer at CalSTRS, is responding to the Nov. 8 editorial "Brown needs to right the ship of CalSTRS," which stated: "A more sophisticated and independent board and an outside audit of pension spiking are just what the teachers' retirement fund needs …"

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