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California teachers' pension fund faces $64.5-billion shortfall

Ed Derman, deputy chief executive of the California State Teachers' Retirement System, says the $152-billion pension fund has only 69% of what it needs to meet future obligations.

April 10, 2012|By Marc Lifsher, Los Angeles Times
  • A teacher leaves her classroom headed for the copier machine with activities papers for first day of school at Canyon Vista Elementary School in Aliso Viejo.
A teacher leaves her classroom headed for the copier machine with activities… (Los Angeles Times )

SACRAMENTO — The nation's second biggest public pension fund, which provides retirement benefits for almost half a million California teachers, faces a projected $64.5-billion shortfall over the next three decades.

Ed Derman, deputy chief executive of the California State Teachers' Retirement System, told reporters Tuesday that the $152-billion pension fund has only 69% of what it needs to meet future obligations.

Pension experts say an asset value equal to about 80% of future obligations is the minimum conservative funding level for a program such as CalSTRS.

To bring its program into balance, CalSTRS would need to boost the total contributions it receives from members, school districts and the state government 13% over the next 30 years, Derman said.

Getting those hikes would be difficult at best, Derman acknowledged, because any increases would need to be approved by the state Legislature.

Lawmakers are holding hearings on a proposal by Gov. Jerry Brown to cut the state's projected pension costs, which the governor and critics have called unsustainable.

The new investment and actuarial data will be presented to the CalSTRS board of directors on Thursday.

The pension fund, which is still recovering from steep losses during the recession of 2007-09, earned a 23% return on investments for the fiscal year that ended June 30. The fund's fiscal year-end return averaged 1.2% over the three years ending June 30, 3.8% over five years, 5.7% over 10 years and 8.1% over 20 years.

CalSTRS leaders realize that "we cannot reasonably expect to invest our way" to full funding, Derman said.

marc.lifsher@latimes.com

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