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California teachers pension faces $65-billion shortfall

April 10, 2012|By Marc Lifsher
  • The California State Teachers' Retirement System headquarters in West Sacramento.
The California State Teachers' Retirement System headquarters… (CalSTRS )

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.

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

Pension experts say that asset value equal to 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 by 13% over the next 30 years, Derman said.

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

Lawmakers currently 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 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.

But even with that kind of one-year return, CalSTRS leaders realize that "we cannot reasonably expect to invest our way" to full funding, Derman said.

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