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Oct. 6 (Bloomberg) -- Executives with the California State Teachers Retirement System said now is the most politically opportune time to ask for a rise in taxpayers’ contributions toward employee pension benefits, to fix a widening funding gap.
The second-largest fund in the U.S., with $146.6 billion of assets as of Sept. 30, wants to include the increase in a pension proposal Governor Jerry Brown has said he plans to roll out possibly as early as this month, said Chief Executive Officer Jack Ehnes. The rise would be the first in 21 years and may be as much as 14 percent, though that likely would be phased in incrementally, he said.
Calstrs, as the fund is known, saw its unfunded liability more than double since 2008 to $56 billion, in part because of investment losses, leaving it without enough money to pay future costs. That’s something that state Auditor Elaine Howle has said is a “high-risk issue” since California is on the hook for the difference.
“We think we’re at the right moment where it’s time to move on the funding strategy politically,” Ehnes said at a board retreat in Huntington Beach. “We’re going to see where we come out on this. There may be competing priorities, educational and otherwise.”
Any increase could be divided among teachers, districts and the state, Ehnes said. Calstrs hasn’t expressed a preference as to how the burden should be spread.
Contribution rates for teachers and school districts haven’t changed since 1990. Teachers pay 8 percent of their income toward retirement. Districts add 8.25 percent; the state’s share is 2.017 percent.
Without additional state funding, the pension plan may run out of money in the early 2040s, Calstrs said in April.
The fund in January 2010 said it would wait until this year to seek a rate increase from the Legislature because lawmakers at the time wouldn’t have been receptive while trying to find a way to erase a $20 billion gap in the state budget.
“What’s different now is that people are getting their arms around the funding situation,” Ehnes said.
Increased public attention to the growing costs of government-worker retirement benefits and to pay-to-play scandals at other pensions also would have made it more difficult to win contribution increases before 2011, the fund said at the time.
Brown’s office didn’t immediately respond to an e-mail requesting comment.
--Editors: Walid El-Gabry, Pete Young
To contact the reporters on this story: James Nash in Sacramento at firstname.lastname@example.org; Michael B. Marois in Sacramento at email@example.com
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