With California facing a massive teacher pension shortfall, Assembly Speaker John A. Pérez, D-Los Angeles, unveiled an effort Wednesday he hopes would fully fund the system.
An influx of revenue has allowed California to emerge from years of yawning deficits and protracted budget fights, and the pressure is mounting for the state to do something about an avalanche of liabilities that runs into the hundreds of billions.
Of those looming obligations, a substantial chunk comes from the gap between how much the California State Teachers Retirement System takes in and how much it will owe retired educators. Gov. Jerry Brown estimated in his budget this year that the liability has grown to $80.4 billion and would require a $4.5 billion annual infusion to balance the books.
“While we know our revenues will fluctuate up and down, our long-term liabilities are enormous and ever growing,” Brown said in his State of the State speech earlier this month.
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Pérez calculates the liability at $71 billion, somewhat lower than Brown. And on Wednesday, the speaker called for a plan that potentially includes increased contributions from all three contributors to the system – the state, school districts and individual teachers.
“Further delays only mean further costs and further exposure for the state’s general fund,” Pérez said. “The fix,” he added, “must begin this year.”
The process will likely get underway with a February hearing, said Assemblyman Rob Bonta, D-Alameda, chairman of the Assembly Public Employees, Retirement and Social Security Committee.
“Since the contribution rates for CalSTRS are set by the Legislature and not the retirement board,” as is the case with the California Public Employees Retirement System, “it is the responsibility of the governor and the Legislature to determine the best way to address the funding shortfall,” Bonta said.
Regardless of how contributions from teachers and districts might change, Pérez said, California retains an obligation to support the retirement fund.
“The state created this fund in the first place,” Pérez said, adding that “for us to suggest that we back out at this point would create an undue toll on those other funding sources.
The teacher retirement fund’s chief executive officer lauded Pérez’s call to action, saying in a statement that “a gradual, predictable increase in contribution rates” is the best way to ensure the fund’s stability.
“With costs rising by $22 million a day, having a plan in place as early as this year could result in billion-dollar savings to the state,” CalSTRS CEO Jack Ehnes said in the statement.
A spokesman for the California Teachers Association said lawmakers must raise the state’s funding level as part of any fix, noting that the promise of a secure retirement helps attract prospective educators, but said the union backs a broad approach.
“What we are looking for is a comprehensive solution,” said Mike Myslinski, a CTA spokesman. “Really, what that boils down to is increases in contributions from the state and school districts, as well as teachers.”