Town Square

Teacher's Retirement Fund Wants You - The Taxpayers!

Original post made by Arnold, Another Pleasanton neighborhood, on Dec 30, 2011

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Posted by Stacey
a resident of Amberwood/Wood Meadows
on Dec 30, 2011 at 8:12 pm

Stacey is a registered user.

There's something not quite clear here. Is the $3.8 billion extra per year the State's share of CalSTRS funding or what CalSTRS needs in total? The State should get out of CalSTRS funding. Having normal costs paid by three different parties adds unnecessary complexity, especially when the State has lagged behind on its obligation.

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Posted by to: stacey
a resident of Another Pleasanton neighborhood
on Jan 2, 2012 at 11:10 am

Good question, Stacey. The 3.8 billion per year (for 30 years) that CalSTRS is asking for is in addition to current contributions. Here is the current contribution/payment breakdown:

2.36 billion - employees
2.31 billion - from the employer (school districts)
1.2 billion - state of CA/Fed (by my estimate 840 million of that comes from the state)
5.87 billion - is the total contribution with the taxpayer portion of funding at 3.51 billion.

Adding 3.8 billion more to contributions, money the state doesn’t have, and education funding comes from the state GF, the total contributions grow to approx. 9.67 billion. Retiree benefit payouts are 10.1 billion. Retirement systems often claim that 75% of benefits come from investment earnings but that doesn’t seem to be the case here, at least not at this point in time or for the foreseeable future.

On page 33 of the CalSTRS CAFR, they provide a breakdown (table) of the total contributions required under different investment return assumptions. These costs, listed under “Funding Rate” are what is most relevant to the PUSD. The percentages are expressed as a percentage of payroll given specific return rates over a thirty year period. For instance, given annual returns of 7.75%, the CalSTRS assumed rate of return, total pension funding needs to jump from the current 18.75% of payroll to 29%. If the assumed rate of return were lowered to 7%, the cost of payroll to fund pensions increases to 35% (every 100K of payroll = 35K in cost). CalSTRS average annual return over the past 10 years is less than 6%. The table provides data for rates of return between 6 and 9 percent.

CalSTRS most recent CAFR: Web Link