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Who pays CalSTRS debt: state, schools, teachers?

Original post made by Arnold, Another Pleasanton neighborhood, on Sep 12, 2011

Who pays CalSTRS debt: state, schools, teachers?

By Ed Mendel

"A day of reckoning may be coming for a huge CalSTRS shortfall: an "unfunded liability" estimated to be $56 billion over the next three decades, requiring a contribution increase of $4 billion a year to close the gap.

The CalSTRS board was told last week that new rules proposed by the Governmental Accounting Standards Board will require school districts and other employers in the system to begin reporting pension liabilities on their balance sheets.

"It's not a drop in the bucket," said Robin Madsen, the California State Teachers Retirement System chief financial officer, who gave a hypothetical example.

"It might change a balance sheet from being a number in terms of total liabilities of about $300 million to a number in terms of total liabilities of about $600 million or $700 million," she said.

Madsen said early versions of the pension accounting proposal had little detail on unusual "cost-sharing" systems such as CalSTRS, but updates are revealing more. CalSTRS has been working with the accounting board to field test proposed changes.

At a GASB hearing in San Francisco on Oct. 13, CalSTRS may request a one-year delay in the changes, now scheduled for fiscal 2013-14. That would allow more time to prepare the 1,042 school districts, 72 community college districts and other employers.

CalSTRS is different from most California public pension systems in several ways. The pension board cannot set contribution rates that must be paid by employers, and teachers do not collectively bargain through unions for pension benefits.

Instead, the CalSTRS contribution rates and pension benefits are set by legislation. Another way CalSTRS says it's different: The pension "plan sponsor" is not the employer, as is usually the case. It's the state.

How costs are shared in the unusual retirement system, particularly for covering the huge unfunded liability, may soon become more than an accounting issue...?"

The original question, "Who pays CalSTRS debt: state, schools, teachers?", is wrong. The taxpayers will pay, the students will suffer loss of programs, and the teachers union will be looking for more revenue. The unfunded liability of the Calstrs pension fund isn't a new issue. It has just been ignored, defered, hidden, and even denied. The people that have been paying attention won't be surprised. If the PUSD claims they've been caught off guard - don't believe them.

The link to the rest of this excellent article that addresses many issues the public isn't aware of (not all). A must read: Web Link

Comments (9)

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Posted by Adam
a resident of Pheasant Ridge
on Sep 12, 2011 at 10:40 am

"Mind is actual only as that which it knows itself to be, and in the state, as the mind of a nation, is both the law permeating all relationships within the state and also at the same time the manners and consciousness of its citizens. It follows, therefore, that the constitution of any given nation depends in general on the character and development of its self-consciousness. In its self-consciousness its subjective freedom is rooted and so, therefore, is the actuality of its constitution."

Gary Larson


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Posted by To: Adam
a resident of Another Pleasanton neighborhood
on Sep 12, 2011 at 11:02 am

Very interesting comments. But where is the additional 4 billion going to come from? Seems like a safe bet those dollars will come from the same K-14 that already has budget issues and is pushing failed parcel taxes.

As long as these pension plans remain out of control you should expect to see a HUGE strain on education budgets. Not sure where CalSTRS stands at the moment, but CalPERS is down over 17 billion less than 2.5 months into their fiscal year. That's roughly 7% on the downside when they need to return about 13% on the plus side just to break even. In other words, between now and June 30 they need to return 20% or our unfunded liability will grow and the taxpayer payments will escalate. CalSTRS is probably in worse shape.


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Posted by Adam
a resident of Pheasant Ridge
on Sep 12, 2011 at 12:06 pm

"The principle of rightness, when distinguished from the right as particular and as determinately existent, is characterised as something demanded, as the essential thing; yet in this situation it is still only something demanded and from that point of view something purely subjective [zany, fruitcakish], and so _inessential_ — something merely showing there. Thus we have fraud when the universal is set aside by the particular will and reduced to something only showing in the situation, primarily in contract, when the universal will is reduced to a will which is common only from the outsider's point of view."

Gary Trudeau


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 12, 2011 at 2:02 pm

What I didn't include in my original post is this:

"In the latest estimate as of June 30 last year, CalSTRS had 61 percent of the assets needed to cover projected costs during the next three decades. Getting to 100 percent would require an additional 14 percent of pay, about $4 billion a year."

Assuming CalSTRS even attempts to get to 100% funding, and CalPERS increased costs are only based on getting to 80% funded (otherwise those costs would be higher), that would add 14% to payroll. The PUSD can't absorb those costs. Their wages increses over the past several years, along with using prior stimulus funds to support ongoing operations, has cemented this problem. I can't imagine how this district can continue to maintain current wages going forward. I suspect the district is aware of the issue and the push for the past parcel taxes is a result of that awareness.

What now? Is the PUSD hoping Obama can push through another stimulus package to save teachers jobs? Will the district use those funds, again, to fund on-going operations which means it's really a taxpayer subsidy and not stimulus? We will see.


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Posted by Evan
a resident of Rosewood
on Sep 12, 2011 at 2:13 pm

"The truth with regard to ethical ideals, the state, the government and the constitution ascends, so it declares, out of each man's heart, feeling and enthusiasm. Such declarations have been poured especially into the eager ears of the young. The words "God giveth truth to his chosen in sleep" have been applied to science ; hence every sleeper has numbered himself amongst the chosen. But what he deals with in sleep is only the wares of sleep. Mr. Fries, one of the leaders of this shallow-minded host of philosophers, on a public festive occasion, now become celebrated, has not hesitated to give utterance to the following, notion of the state and constitution: "When a nation is ruled by a common spirit, then from below, out of the people, will come life sufficient for the discharge of all public business. Living associations, united indissolubly by the holy bond of friendship, will devote themselves to every side of national service, and every means for educating the people." This is the last degree of shallowness, because in it science is looked upon as developing, not out of thought or conception, but out of direct perception and random fancy. Now the organic connection of the manifold branches of the social system is the architectonic of the state's rationality, and in this supreme science of state architecture the strength of the whole, is made to depend upon the harmony of all the clearly marked phases of public life, and the stability of every pillar, arch, and buttress of the social edifice. And yet the shallow doctrine, of which we have spoken permits this elaborate structure to melt and lose itself in the brew and stew of the "heart, friendship, and inspiration." Epicurus, it is said, believed that the world generally should be given over to each individual's opinions and whims and according to the view we are criticising, the ethical fabric should be treated in the same way. By this old wives' decoction, which consists in founding upon the feelings what has been for many centuries the labour of reason and understanding, we no longer need the guidance of any ruling conception of thought. On this point Goethe's Mephistopheles, and the poet is a good authority, has a remark, which I have already used elsewhere:

"Verachte nur Verstand und Wissenschaft,
des Menschen allerhöchste Gaben -
So hast dem Teufel dich ergben
und musst zu Grunde gehn."

Goethe the Gasper


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Posted by Arnold
a resident of Another Pleasanton neighborhood
on Sep 12, 2011 at 3:08 pm

What I didn't include in my original post is this:

"In the latest estimate as of June 30 last year, CalSTRS had 61 percent of the assets needed to cover projected costs during the next three decades. Getting to 100 percent would require an additional 14 percent of pay, about $4 billion a year."

Assuming CalSTRS even attempts to get to 100% funding, and CalPERS increased costs are only based on getting to 80% funded (otherwise those costs would be higher), that would add 14% to payroll. The PUSD can't absorb those costs. Their wages increses over the past several years, along with using prior stimulus funds to support ongoing operations, has cemented this problem. I can't imagine how this district can continue to maintain current wages going forward. I suspect the district is aware of the issue and the push for the past parcel taxes is a result of that awareness.

What now? Is the PUSD hoping Obama can push through another stimulus package to save teachers jobs? Will the district use those funds, again, to fund on-going operations which means it's really a taxpayer subsidy and not stimulus? We will see


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Posted by Abel
a resident of Avila
on Sep 12, 2011 at 4:08 pm

With consideration of the 14% which, proximate to our earlier postings, relates in a mediated way to the 2.7%, we have as follows:

"In relation to external things, the rational aspect is that I possess property, but the particular aspect comprises subjective aims, needs, arbitrariness, abilities, external circumstances, and so forth (see § 45). On these mere possession as such depends, but this particular aspect has in this sphere of abstract personality not yet been established as identical with freedom. What and how much I possess, therefore, is a matter of indifference so far as rights are concerned."

Josh McCord


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Posted by Pension deficit equals big cost
a resident of Another Pleasanton neighborhood
on Sep 12, 2011 at 4:51 pm

"Posted by Abel, a resident of the Avila neighborhood, 29 minutes ago

With consideration of the 14% which..."

Not sure you're understanding how VERY SERIOUS this issue is. Your subjective needs and stupidity have little to do with real world budget issues that will impact the education of children. 14% increse to compensation will directly impact the districts ability to deliver a quality education.

Sybil, that probably doesn't concern you as long as the unions can bargain for increased compensation, right?


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Posted by Candy Man Luke
a resident of Las Positas
on Sep 12, 2011 at 6:47 pm

@"Not sure you're understanding how VERY SERIOUS this issue is."

No, this is really, really, really serious. Please READ!!!!

"The presentation of itself, however, as pure abstraction of self-consciousness consists in showing itself as a pure negation of its objective form, or in showing that it is fettered to no determinate existence, that it is not bound at all by the particularity everywhere characteristic of existence as such, and is not tied up with life. The process of bringing all this out involves a twofold action — action on the part of the other and action on the part of itself. In so far as it is the other's action, each aims at the destruction and death of the other. But in this there is implicated also the second kind of action, self-activity; for the former implies that it risks its own life. The relation of both self-consciousnesses is in this way so constituted that they prove themselves and each other through a life-and-death struggle. They must enter into this struggle, for they must bring their certainty of themselves, the certainty of being for themselves, to the level of objective truth, and make this a fact both in the case of the other and in their own case as well. And it is solely by risking life that freedom is obtained; only thus is it tried and proved that the essential nature of self-consciousness is not bare existence, is not the merely immediate form in which it at first makes its appearance, is not its mere absorption in the expanse of life. Rather it is thereby guaranteed that there is nothing present but what might be taken as a vanishing moment — that self-consciousness is merely pure self-existence, being-for-self. The individual, who has not staked his life, may, no doubt, be recognized as a Person; but he has not attained the truth of this recognition as an independent self-consciousness. In the same way each must aim at the death of the other, as it risks its own life thereby; for that other is to it of no more worth than itself; the other's reality is presented to the former as an external other, as outside itself; it must cancel that externality. The other is a purely existent consciousness and entangled in manifold ways; it must view its otherness as pure existence for itself or as absolute negation.


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