The Legislative Analyst's Office today called on lawmakers to fully fund the state teachers' pension fund, or CalSTRS, an ambitious goal that would cost billions of dollars over the next 30 years.
In a 13-page report to the Legislature, the nonpartisan LAO said the time has come for California to remedy the $73 billion funding gap confronting CalSTRS.
The funding gap represents an estimate of the long-term shortfall in money needed to pay benefits. Hurt by the recession and a decision more than a decade ago to raise benefits, CalSTRS has plenty of cash to meet needs for the foreseeable future, but it's projected to run out of money in 2044.
Officials at the California State Teachers' Retirement System have been issuing similar warnings the past several years, most recently in a report to the Legislature last month. CalSTRS spelled out eight different options for erasing its funding gap over time, and today's LAO report urges the Legislature to choose the speediest remedy - fully funding the system in 30 years.
It won't come cheap - it would take another $4.5 billion a year to get CalSTRS up to par in 30 years. Currently the system gets $5.7 billion a year from teachers, school districts and the state, with the state's contribution coming to $1.4 billion.
The LAO said the Legislature needs to come to grips with the problem quickly. Because the additional cash can be invested to generate higher returns, raising contributions next year would create immediate payoffs. By contrast, "the longer it takes for the state to increase contributions...the more costly it generally will be to erase the unfunded liability," the LAO report said.
Call The Bee's Dale Kasler, (916) 321-1066. Follow him on Twitter @dakasler.