On Dec. 2, the Teachers’ Retirement Board, the body responsible for the fiscal oversight of the California State Teachers’ Retirement System (CalSTRS) voted to reduce their current investment rate assumption from eight percent to 7.75 percent. This change will increase the current shortfall to the CalSTRS system by an additional $5 billion, leaving the system with a total shortfall of $45 billion. The TRB did consider moving toward a lower investment rate of return of 7.5 percent but decided to take an incremental step and re-evaluate their rate of return with more data next year.
CTA Retirement Chair, Maggie Ellis from the Elk Grove Unified School District, expressed her concern to the TRB about the impact a 7.5 percent rate could have on member benefits and encouraged the Board to take a smaller incremental step of moving to 7.75 percent and to re-evaluate this issue with additional data next year.
While the size of the shortfall is large, it is not a sum that must be paid for immediately, but will need to be covered over a thirty-year period of time. The State General Fund is constitutionally responsible for the overall funding of the CalSTRS system and is responsible for setting contribution rates to the system.
CTA is discussing long-term ways to address the current shortfall for the CalSTRS system in a manner that will keep the system whole while limiting its overall impact to educational funding during these dire economic times.