The newest tally reflects CalSTRS’ financial condition as of last June 30. The pension fund said the shortfall grew by $2.7 BILLION in the 12 months since the previous valuation of June 30, 2012.
CalSTRS’ latest calculation comes as the Legislature and Gov. Jerry Brown continue to debate how to fix the teachers’ retirement fund. Brown originally said the Legislature could enact a funding plan for CalSTRS in 2015, but he also supported the decision by Senate and Assembly committees to hold hearings last month on the issue.
Two months ago, CalPERS approved a plan to raise contribution rates from state and local agencies to deal with a long-term shortfall of around $100 billion. Unlike the public employees’ pension fund, however, the teachers’ fund needs the Legislature’s permission to implement a rate hike.
The California State Teachers’ Retirement System has been struggling financially for some time and was badly wounded by the 2008 market crash. It has enjoyed recent investment gains, and the worsening of its long-term deficit has actually moderated; it had earlier forecast that the gap would grow by almost twice as much as it did.
Nonetheless, the fund insists the Legislature must act.
“Since at least 2006, we’ve said that CalSTRS cannot rely solely on healthy investment returns to make up the ground lost to the economic downturns and market volatility of the past 14 years,” said CalSTRS Chief Executive Jack Ehnes in a prepared statement.
Although CalSTRS has enough cash to deal with its obligations for the foreseeable future, it is only 66.9 percent funded for the long term. The pension fund said its shortfall grows by $15 MILLION a day. If the problem isn’t corrected, CalSTRS said it expects to run out of cash by 2046. That’s actually three years later than the last time CalSTRS issued a prediction, but the pension fund said the problem can’t wait much longer.
The latest calculation “reflects a reality, affirmed by the Legislature, the administration and stakeholders, that stabilizing CalSTRS funding will require contribution increases,” Ehnes said. “These can be gradual, predictable and fair to all parties, while meeting the long-term needs of the system.”
Considering the monetary drain on this system, I expect that CalSTRS will have no money left to spend on anybody’s future.