According to the state Legislative Analyst's Office, California faces a budget deficit next year of a mere $1.9 billion and is looking at budget surpluses in the years to come. But that's somewhat of a fallacy.
If the state Legislature was funding the retirements of teachers on a sufficient basis, the deficit would be more like $6.5 billion next year.
The difference of $4.5 billion is how much more the state needs to spend in 2013 — and each year for the next 40 years — to catch up on its contributions for teacher retirement plans. Overall, the California State Teachers Retirement System is underfunded to the tune of $65 billion.
We've written a good deal in recent years about pensions and the unfunded liabilities that threaten to eat deeper into funds needed to address basic public needs such as filling potholes. Most of these liabilities are rooted in reckless giveaways to public employees a decade ago that now threaten to sink cities and counties — including Sonoma County — across the state.
But as we've stated before, the situation concerning CalSTRS is different. While government agencies have had been forced to significantly increase their contributions toward retirements — 400 percent in Sonoma County — to make up for investment losses, the percentage the state contributes to teacher pensions has actually declined. Teachers contribute 8 percent of their salary toward their retirement while school districts pitches in another 8.25 percent. In addition, the state contributes another portion, but that has fallen from 4.6 percent in 1998 to 2.5 percent today.
In addition, benefits for teachers are far more modest than for other public employees. Teacher pensions are based on a formula of 2 percent of salary per year with a minimum retirement age of 60. Sonoma County employees, by comparison, get 3 percent at 60, while public safety employees get 3 percent at 50.
In addition, teachers, by a quirk of history, are not allowed to contribute to or benefit from Social Security. <NO1>Nor do CalSTRS retirees receive any employer-paid health care benefits after age 65. Meanwhile, most other public employees benefit from both.
<NO>But perhaps the biggest difference between California's two largest retirement systems is that CalSTRS has no way of forcing the hand of the Legislature. The California Public Employees Retirement system, however, merely has to tell the state how much more it needs <NO1>in terms of funding<NO>and the state is required to send a check.
This needs to change. Earlier this year, the Legislature passed a resolution encouraging CalSTRS to develop a plan for resolving the system's pension liability. <NO1>CalSTRS is slated to return to the Legislature by mid-February.
<NO>In our view, three things are needed. First, CalSTRS needs to demonstrate to lawmakers that those oversight problems that led to past problems with illegal pension spiking — most of them for high-ranking administrators — have been addressed.