The fund that manages pensions for California teachers on Wednesday voted to lower its investment forecast by half a percentage point, a decision that will have many educators stepping up their payroll contributions for their retirement plans by several hundred dollars a year.
The board of the $196 billion California State Teachers’ Retirement System chose to phase in the lower investment forecast, ratcheting it down from today’s 7.5 percent to 7.25 percent for its current financial plans. It’ll drop to 7 percent next year.
The decision follows a similar move by CalPERS last month that gradually drops its investment forecast from 7.5 percent to 7 percent.
Both decisions acknowledge that the funds have earned lower-than-expected returns in recent years. With less money from investments, the funds are turning to taxpayers and employees to shore up their finances.
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“This is a path we’re on, and we’re not done,” state Controller Betty Yee said.
Lobbyists for teachers, school administrators and school boards expressed concerns about the costs of the change, but they told the CalSTRS board that they supported the revised forecast. They characterized defined-benefit pensions as essential recruiting tools at public schools.
The board’s decision to lower the forecast to 7 percent was more conservative than what CalSTRS staff recommended in a report it released last week. That document recommended a reduction to 7.25 percent.