My turn: The facts about teacher pensions

By Jack Ehnes, Special to CALmatters

I read with interest the perspectives on public pensions from Marshall Tuck and Tony Thurmond, the two candidates running for the state’s Superintendent of Public Instruction.

The next superintendent will sit as an ex officio member of the Teachers’ Retirement Board with oversight for the California State Teachers’ Retirement System. As CalSTRS’ chief executive officer, I’d like to provide a few important facts about the system.

CalSTRS provides retirement, disability and survivor benefits for 933,000 prekindergarten through community college educators and their families. In retirement, our members receive a modest benefit, averaging $4,475 per month. Most of our members are career educators who have spent an average of 25.6 years in the classroom.

Because California’s educators do not participate in Social Security, CalSTRS benefits provide the bulk of our members’ retirement income.

Paying for educators’ pensions is a shared responsibility. CalSTRS is unique because it receives contributions from the state, and from educators and their school district employers, and because contribution rates are set in state statute.

For that reason, since its establishment in 1913, CalSTRS has never taken a pension holiday. When market conditions necessitated an increase, such as the 2008 financial crisis, CalSTRS’ only mechanism to adjust contribution rates was to seek approval from the Legislature and Governor.

As a result, member contribution rates had not increased since 1972, and employer contribution rates had not increased since 1990.

Until the 32-year funding plan was adopted in 2014, contribution rates were insufficient to cover today’s benefit payments and obligations to future retirees. Today, members contribute slightly more than 10 percent of their salaries toward their pension, while school districts and the state contribute approximately 16.3 percent and 9.8 percent, respectively.

It is true that the unfunded actuarial obligation of the system is growing. It’s approximately $107 billion currently. While this is nothing to ignore, the growth was fully anticipated as part of the funding plan and is expected to start declining in 2027.

Today, CalSTRS is on track to full funding by 2046, and all parties must continue their commitment to the state’s educators by protecting the plan.

On July 1, 2019, CalSTRS will deliver its first report on the funding plan to the Legislature as required by law. The next superintendent will be on our board when we present the report, and we encourage solutions that will deliver on our promise to California’s educators.

Jack Ehnes, is chief executive officer of the California State Teachers’ Retirement System, [email protected]. He wrote this commentary for CALmatters.

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