CalSTRS today agreed to lower its investment forecast by a quarter point.
Board members said the decision is a bow to economic reality. But it also complicates the teachers' pension fund's efforts to bridge a funding gap that's already in the billions of dollars.
By cutting the forecast from 7.75 percent to 7.5 percent, the CalSTRS board went along with recommendations from its actuarial and investment consultants. It was the second time in 14 months that CalSTRS had cut the forecast after leaving it untouched for 15 years.
CalSTRS had already calculated that it needed another $4 billion a year in contributions - from the state, school districts and teachers - to right its financial ship. Lowering the investment forecast means that requirement will grow by another $500 million or so.
But in a tricky investment climate, following a year in which CalSTRS earned just 2.3 percent, board members went with the lower forecast. "I think it's best that we be conservative," said Terry McGuire, the designated representative for board member and State Controller John Chiang.
Only one board member voted against the shift, Pedro Reyes, representing the Department of Finance. The higher forecast "is not unreasonable," he argued. "Let's stay where we are right now, (and) visit this in another year."
While CalSTRS is pushing the Legislature for more money, many Republicans are favoring proposals to erase funding shortfalls for all public pensions by reducing benefits. Gov. Jerry Brown, a Democrat, favors a plan to give newly hired public employees a combination traditional pension and a 401(k)-style program.
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