Posts Tagged: CalSTRS

Stock market soars — and so do public pension costs

The New York Stock Exchange on Wall Street, New York. (Photo: Wikipedia)

by DAVID CRANE posted 05.26.2015

The way our government accounts for public employee pension promises is nothing short of fraud, yet no public official has gone to jail or paid a price for what surely ranks among the largest muggings of citizens in US history. Let me explain. As the stock market reaches record levels, little is heard anymore from public officials who used to blame market declines for rising pension costs.

The push back from schools hit with a huge CalSTRS rate increase, expected to be an additional $3.7 billion a year when fully phased in, is not that it’s unaffordable and will hurt students or unfairly lets the state and teachers off the hook. Instead, a coalition of school districts, including the giant Los Angeles Unified School District, wants a separate budget item for the CalSTRS rate increase within Proposition 98.

The CalSTRS board was told this month that financial experts are forecasting investment earnings of 7 percent a year or less during the next decade, below the 7.5 percent assumed by the pension fund. If that’s correct, long-sought legislation in June that phases in a $5 billion CalSTRS rate increase over the next seven years could fall short of the goal of projecting full funding in three decades.

Full funding of the troubled California State Teachers Retirement System has been approved by the Legislature, with most of the additional $5 billion coming from school districts that get no offsetting money from the state.

Brown budget eyes full funding for teachers’ pensions

Lobby of the CalSTRS building in West Sacramento. (Photo: Paul Houseberg)

by ED MENDEL posted 05.16.2014

Gov. Brown has made a long-delayed proposal to get CalSTRS to full funding over the next three decades, giving the biggest rate hike to schools and smaller increases to the state and teachers. The nation’s largest teacher pension fund, which received $5.8 billion from the three sources last fiscal year, needs an additional contribution of about $4.2 billion a year to project full funding in 30 years.

The total spending increase needed to get CalSTRS, brought low by mismanagement, back to full funding may be the biggest-dollar scenarios ever presented to a California legislative committee. Legislators were told last week an additional $181.7 billion would be needed for full funding in 20 years. If payments are spread out to ease the budget bite, the additional amount needed to reach full funding in 60 years is a staggering $618 billion.

CalPERS has denied membership to nine charter schools, saying a proposed IRS rule could end crucial tax advantages if “even a single non-governmental entity” is allowed into the giant pension system. The association said the California Public Employees Retirement System is the only public pension system in the nation to deny membership on the basis of an IRS rule. (Photo: Coolcaesar, Wikipedia)

Most California public pension funds have the power to raise annual employer rates when they need more money. The California State Teachers Retirement System, a century old this year, is an outlier that needs legislation to raise rates. As lawmakers at the Capitol struggled with budget cuts during a deep economic recession, pleas for a CalSTRS rate increase were not acknowledged with a legislative hearing until last year.

OPINION: Nearly a year has passed since the California State Teachers Retirement System (CalSTRS) asked you and the Legislature to address a pension deficit for which it seeks a 30-year $240 billion cash injection, starting with $4.5 billion per year.

The CalSTRS board was told last week that it’s unclear whether the new liability figure will be reported by the state or spread among school districts, where more than doubling current debt might lower credit ratings and drive up borrowing costs.