The Legislature has sent to the Governor a package of pension improvements for active and retired members of the State Teachers' Retirement System.
When added to the recently enacted defined benefit supplement, the new legislation is worth approximately $11.5 billion. It will be funded from excess earnings of the CalSTRS fund.
Governor Gray Davis, who negotiated with CTA, the Retirement Coalition and the STRS board on the details, has agreed to sign the omnibus retirement package.
"It is a great day for education," says CTA President Wayne Johnson. "We have been seeking relief for teachers and enhanced benefits for years - and now our teachers can look forward to a more secure retirement. And, since teachers will be encouraged to remain in the classroom, our students will benefit as well."
The deal could help alleviate the teacher shortage the state is facing as its student population grows. California is going to need approximately 287,000 new teachers within the next 10 years.
"We have nothing but praise for the Legislature, Governor Davis, and STRS board members, who participated in the coalition to get this package of bills passed," says Johnson.
The package includes the following components:
Highest year compensation - Rather than using the average of the highest three years of compensation, pensions for teachers who have taught 25 years will be calculated on their highest year of compensation.
- Career bonus - The current bonus remains in effect and a new longevity bonus will be added for any STRS member who reaches 30 or more years of service during the next 10 years. The additional monthly pension amount is tied to years of service. Those with 30 years of service will receive $2,400 more per year. For 31 years, the increase will be $3,600 per year. For 32 years, teachers' pensions will go up $4,800. (With the addition of STRS' 2 percent simple-interest cost-of-living adjustment, the amounts will be a bit higher.)
- Summer school or other service - STRS members working summer school or inter-session, or receiving stipends for other work will receive STRS credit for the work exceeding one year of service. It will take the form of a cash annuity.
- Medicare Part A - All members who are not otherwise eligible for coverage under another plan will receive Medicare Part A coverage.
- Ad hoc benefits for current retirees - Increases in pension benefits for current retirees will be based on the year in which they first received pensions. STRS members receiving pension payments before 1975 will get a 6 percent increase. The package will not, however, include ad hoc payments for post-1997 retirees.
- Extension of minimum guarantee - Last year, SB 713 boosted pension payments to members and beneficiaries whose pensions were less than $15,000 annually. This year's package extends the floor to members (and the beneficiaries of members) who retired before age 55, were disabled, or had 20 years of service by age 60; those who were inactive at retirement; and those who had sufficient sick leave to reach 20 years.
As part of the negotiations, the state will get back 1.127 percent of the annual state contribution to STRS - Elder Full Funding - or about $3.474 billion over 30 years, according to best estimates. STRS will retain 2.075 percent, or approximately $7 billion over 30 years, from the Elder Funding stream.
Three of the bills in the retirement package were sponsored by CTA: AB 1933 (Strom-Martin and Shelley), which increases the career bonus; AB 821 (Correa), which bases pension calculations on the highest year of compensation; and AB 2700 (Lempert), which provides retirement credit for extra assignments.
Also included were AB 429 (Correa), which makes STRS pensions equitable with PERS; SB 1435 (Johnston), which provides Medicare Part A benefits; and SB 1505 (Burton), which extends the provisions of SB 713 (Burton) to a number of teachers who for technical reasons were not covered by the earlier legislation.
