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Key Points CalSTRS Unfunded Liability

Background:

CalSTRS, like pension funds and investment-based savings worldwide, has taken a financial hit due to the global recession, but it is far from bankrupt and it will not bankrupt the state. CalSTRS has historically been a sound system, and until the market collapse had consistently met or exceeded its assumed rate of return. Even under recent economic conditions, CalSTRS is 71 percent funded and has sufficient assets and projected contributions to pay benefits until 2044. The fund, however, is facing a shortfall that must be addressed to ensure retirement security for educators. CalSTRS members contribute 8 percent of their monthly pay to help finance their retirement. Employers or local school districts kick in an equal 8.25 percent of monthly pay. The state contributes a little more than 3 percent (which previously was 4.6 percent but was reduced a decade ago when the fund was flush)  and the returns garnered by CalSTRS investments do the rest. Unlike most workers, educators in California do not earn any Social Security benefits, and teachers who previously worked in the private sector often see their Social Security benefits eliminated or drastically reduced from federal Social Security offsets, despite the fact that they paid into the Social Security system. Most often, their CalSTRS pension is their only source of retirement income.

Main Message:

Making sure educators have a secure retirement is critical to attracting and keeping quality teachers in the profession. The CalSTRS shortfall didn’t happen overnight and it can’t be addressed overnight. CTA supports a fair and comprehensive solution that involves all stakeholders. The state, local school districts and educators will have to increase contributions.

Talking Points:
  • Making sure educators have a secure retirement is critical to attracting and keeping quality educators in the profession. The state must ensure that the retirement commitments made to our hard-working teachers and other education professionals are fulfilled.
  • Teachers have modest retirement benefits. The average retirement benefit for a teacher who worked more than 25 years is $3,300 per month.
  • The CalSTRS shortfall did not happen overnight and it cannot be addressed overnight. It is going to take time, commitment and collaboration from all stakeholders.
  • CTA believes that all stakeholders must work together to craft an ongoing, comprehensive solution that will not harm education and make it more difficult to attract and retain quality educators.  CTA supports a fair share solution with increases in contributions from the state, school districts and educators.
  • In crafting a shared solution, CTA believes the state needs to increase its CalSTRS contribution to a minimum of previous levels (4.6 percent).  The State has saved more than $3.5 billion from reduced contributions over the past decade. As in the past, the state’s contribution should not take any funding away from students and should not come from Prop. 98 funds.
  • The solution needs to be fair and equitable for all educators. CTA believes that increases in educator contributions should minimize inequities between current and future educators, and should not create new, additional or unequal contribution tiers. 

Every child deserves a chance to learn and no child succeeds alone.

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