CalSTRS is thinking of cutting its investment forecast for the second time in barely a year, a move that will reflect the increase strain on the pension fund.
The teachers' pension system on Thursday will consider a recommendation from its actuarial consultant to cut the forecast by a quarter point, to 7.5 percent. The consultant, Milliman Inc., said the current rate of 7.75 percent "is greater than the expected long-term return."
Lowering the forecast means could intensify the pressure on the Legislature and Gov. Jerry Brown to come up with a funding solution for CalSTRS. The retirement system is underfunded by tens of billions of dollars; lowering the forecast will increase the gap by another $5.9 billion, according to Milliman's memo to the CalSTRS board.
Last week CalSTRS said it earned 2.3 percent on its investments in calendar 2011, far below the current forecast.
A memo by another CalSTRS advisory firm, Pension Consulting Alliance, says the pension fund can expect "a continuation of a very difficult investment environment."
Republican lawmakers and other conservatives are seeking to rein in pension costs by lowering benefits; the governor has proposed his own reform plan that blends a traditional defined benefit pension with a 401(k)-style program that shifts some of the investment risk to workers.
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