Educators may notice a little extra going out of their paychecks into to the California State Retirement System (CalSTRS) beginning this month, but that’s a good thing since the money will not only come back to them at retirement, it will stabilize the retirement system into the future.
After years of attempts to close a shortfall in the teachers retirement system that has mounted to $74 billion, the Legislature in June approved Gov. Jerry Brown’s pension plan that provides increased contributions from educators, school districts and the state.
“For roughly the last 10 years our highest priority and our members’ most pressing concern has been to secure the long-term stability of the Defined Benefit Program,” said Harry Keiley, chair of the Teachers’ Retirement Board and member of the Santa Monica-Malibu Classroom Teachers Association.
The historic action calls for member contributions to increase from 8 to 10.25 percent over the next three years. School and community college district contributions will increase from 8.25 percent to 19.1 percent over seven years while the state’s portion would increase from the current 3.041 percent to 6.3 percent in the next three years. The increases began to take effect July 1.
CTA has long recognized the importance of a secure retirement to attract and retain teachers, and its legislative advocates began working with the governor early on to come up with a fair solution that insures all stakeholders shoulder the burden. The governor’s plan comes amid a number of threatened ballot initiatives that would have damaged a safe and secure retirement system.
“This plan will help our schools attract and retain our highly qualified educators by shoring up CalSTRS and keeping the promise made to our dedicated school staff that they will have a secure retirement after a lifetime of devoted service to our students,” said CTA President Dean E. Vogel.
Shortfall can be managed
Although CalSTRS has historically been a sound system, it has faced a funding shortfall since the global financial recession hit in 2008. Absent any changes in contribution rates, the program would have been depleted of its assets as early as 2046. The funding shortfall of $74 billion can be managed, according to CalSTRS officials, but required action.
“This does represent what seems like a hefty increase in our contributions, since members’ rates have remained at 8 percent since 1972, but this increase will provide for an ongoing annual benefit increase post-retirement. This is a really good thing for our members.” said Dana Dillon, CalSTRS Board member and CTA Board member.
The approved plan begins to address that $74 billion funding gap, but as CTA President Dean Vogel said, “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 — the state, districts and educators— so we appreciate the governor’s plan to fully fund the teachers’ retirement defined benefit plan within 30 years.”