On Feb. 14, CTA Legislative Advocate Jennifer Baker and Ed Derman, Chief Deputy Executive Officer of the State Teachers’ Retirement System (CalSTRS) helped lawmakers’ staff members get a better understanding of how the teachers’ pension fund works and the challenges facing it in the years ahead.

These staff persons will be responsible for advising the legislators they work for on these very important issues.

The task ahead will be addressing how the State will handle the CalSTRS unfunded liability.

For more information about the retirement system and pension issues, see the retirement section of cta.org.

The California State Teachers’ Retirement System (CalSTRS) Board has just released its report about how the multi-billion dollar pension system can continue funding its defined benefit plan.

The report, which the legislature requested by passing SCA 105 (2012), has been posted on the retirement system’s web page as the CalSTRS Final Draft, SCR 105 Report.

You can also read more about retirement at www.cta.org Retirement section.

The effective date of laws “reforming” the state’s public pension systems – CalSTRS and the
California Public Employees’ Retirement System (CalPERS) — is January 1, 2013.  These changes generally impact new employees, although some of the revisions will also affect employees hired on or before December 31, 2012.

Please visit the CTA website, which provides more information on retirement legislation.

Many members are alarmed after hearing that CalPERS is planning an 85% premium increase in their Long-Term Care (LTC) insurance program and has closed the program to new applications.  CalPERS has announced that this increase will go into effect in 2015 for over 110,000 state workers and retirees.  Without a LTC program available through CalSTRS, members are looking for other alternatives.  Remember that NEA Member Benefits offers the NEA Long-Term Care Insurance Program exclusively for CTA/NEA members and their families.

On Tuesday, Gov. Brown unveiled a public employee pension reform package that contains some important changes for newly hired educators in California schools.

1.  All changes apply to NEW CalSTRS members – those hired after the bill has passed and enacted into law.
2.  All new CalSTRS members would be required to pay half of the normal cost of their retirement. The language is very unclear on the impact this would have for local school districts and school funding under Proposition 98.
3. Changes the formula for determining retirement benefits from 2% at age 60 to 2% at age 62, and from 2.4% at age 63 to 2.4% at age 65.
4. Eliminates the ability of teachers with more than 25 years of service to use their single highest year salary when calculating retirement benefits. All future teachers would be required to use their three highest years of salary.

The changes and others in the governor’s plan  would undermine the state’s ability to recruit and retain teachers, firefighters, police officers, and other key employees.

The California Teachers Association has sent a letter of opposition to the Legislature, urging lawmakers to vote against the bill containing the governor’s proposal, AB 340.

More information about the measure can be obtained from the CTA letter of opposition (below).

The final impact of the devastating financial losses in 2008-09 was felt by CalSTRS, which this week reported a two percent decrease in the funding status of its Defined Benefit Program.

Nevertheless, the results of the Defined Benefits Program valuation were greeted with guarded optimism by CalSTRS officials, who maintain that this is the last valuation that will signal a loss. Beginning with this valuation, and over the next two, the valuation will reflect the 23.1 percent investment return from 2010-11.

The latest valuation shows a funding status sufficient to cover 69 percent of projected liabilities, leaving the fund with a $64.5 billion funding shortfall. The funding status means that for every dollar in pension obligations the fund has 69 cents worth of assets available. The previous valuation showed the funding shortfall at $56 billion.

The growth in the funding shortfall, however, is $4.3 billion less than was previously predicted, due primarily to the initial recognition of a 23.1 percent investment return for the 2010-11 fiscal year.

“Although healthy returns in 2010-11 reduced the magnitude of required future contributions, we cannot count purely on investment earnings to bring this crucially important fund back to financial health,” said CalSTRS Chief Executive Officer Jack Ehnes. “What’s needed now in the pension reform discussion is a long-term funding plan that only the Legislature and Governor have the authority to implement. CalSTRS is committed to working with all of our stakeholders to develop a plan that is both gradual and predictable for our members, their employers and the State of California.”

In the meantime, CTA’s leadership and staff are working with legislative leaders and the governor’s office to begin those discussions around long-term solutions.

CTA Legislative Advocate Jennifer Baker (at center) declares at a Sacramento Bee Wednesday evening forum on teachers’ retirement that a measure of the state’s commitment to public education will be its willingness to fully fund its obligations to the California State Teachers’ Retirement System.

Serving on a panel with Baker were (from l.) Ed Derman of CalSTRS, Pension Foe Marcia Fritz and Jason Sisney of the Legislative Analyst’s Office (not pictured). During the panel, Baker noted that a secure pension is vital to helping the state recruit and retain its highly qualified instructional force.

Baker also stressed the importance of the state securing new revenues to provide adequate funding for schools.

She stressed that teachers had given up a number of concessions, including incentives designed to keep educators working longer to stave off a shortage.

Baker also pointed out that unlike private workers, teachers and other public employees do not earn Social Security benefits, and those entering the teaching profession with Social Security credits are penalized when they try collecting the federal retirement benefits they earned in their
prior working life.

CalSTRS’s Derman stated that about 70% of the system’s members are women, and the average retirement age is 62.

Derman attributed the system’s unfunded liability under new federal accounting standards reflects the recent stock market volatility. He said the system invests for the long term and that a combination of changes, including the recovery of the stock market, will help the system address the accounting shortfall.

While Fritz acknowledged that CalSTRS provides only “modest” retirements to educators, she applauded the governor’s hybrid plan and said pensions should be capped so that no educators – including administrators – would receive more than $100,000 in retirement earnings.

Sisney said that the governor and legislators are faced with a hard choice of either securing more funding for the retirement system or reducing benefits for future employees, with both practicality and court rulings limiting reductions to current employees’ pensions.

A number of CTA members, including key members of the State Legislation Retirement Committee, and retired teachers attended the panel presentation, including Dana Dillon, who serves on the CalSTRS Board, and Maggie Ellis, who chairs the CTA Retirement Committee.

Dave Low (at right), the executive director of the California School Employees Association, during a debate Wednesday before the Sacramento Press Club, emphasizes the importance of a secure pension to members of his Association, including bus drivers and other dedicated workers whose retirement pay swirls around $1500 a month.

Low countered assertions by Marcia Fritz (at left), of the California Foundation for Fiscal Responsibility, who argued that the state’s dire fiscal condition stems from generous employee pensions.

Low noted that through negotiations, local unions had given back many of the pension gains they had won in recent years.  He stressed that no union would demand pay or benefits that would bankrupt the local agency that employs its members.

Fritz contended that pension spending is the fastest growing city expenditure and that pension costs are forcing the state to lay off teachers, leaving debt for our children to pay. She also argued that retirement benefits among highest in the nation, unmatched by the private sector.

Low countered that the state’s economic woes reflect a recession prompted by Wall Street manipulations and greed.  He also argued that media reports have sensationalized the small percentage of cases in public pension systems where the highest-paid executives have been able to “spike” their pensions.  Low said unions have been pressing for pension reform that would close the loopholes that allow a few ranking employees to secure unfair advantage.

Low underscored that the machinations on Wall Street had cost the California State Employees’ Pension System more than $64 billion.

Low said that his members and the more than one-million member Californians for Retirement Security are supporting elements of Gov. Brown’s pension reform package that
would eliminate spiking and other irregularities.

Photo and story by Len Feldman

The Sacramento Press Club is hosting two events on Wednesday that will give teacher and school employee advocates  the chance to debunk the unfounded assertions of those who would take away their secure retirements under the guise of  “pension reform.”

At noon, David Low of the California School Employees Association and a key member of the Californians for Retirement Security, takes on Marcia Fritz, president of CA Foundation for Fiscal Responsibility, a group aiming to convert secure pension systems into 401k plans that enrich Wall Street at the expense of public employees’ retirement security.  The event is set to take place in the 15th floor conference room of 1201 K St. The contact is the Press Club’s Brian Joseph 916 233 9681.

At 6:30 p.m. at the Sacramento  Bee’s offices — at 21st and Q Street in Sacramento – pension experts, including California Teachers Association’s Jennifer Baker, California State Teachers’ Retirement System’s  Ed Derman, and Legislative Analyst Office’s Jason Sisney, will serve on a panel with Fritz that focuses on the topic of “Who Will Pay for Teacher Pensions.”  Educators are encouraged to attend this free event. RSVP to Brian Joseph at 916.233.9681.

CTA-Retired President Ed Foglia (gesturing) warns about the effects on the classroom and students of the governor’s proposal to raise the standard retirement age to 67. Other representatives included higher education faculty and members from United Teachers Los Angeles. They met with Assembly Member Warren Furitani’s staff (at photo left) and other legislative staff later in the day.

(SACRAMENTO, Calif.) 7 February 2012 – A coalition of pro-education groups brought about 100 educators to the state capitol on Tuesday to educate legislators about the vital role a sound public retirement system plays in recruiting and retaining highly qualified instructional and support personnel.

The California Retirement Coalition, whose members include the California Teachers Association, United Teachers Los Angeles, the California Retired Teachers Association, the Association of California School Administrators, the Faculty Association of the California Community Colleges, the Los Angeles College Faculty Guild, the Small School Districts’ Association, and Delta Kappa Gamma, told lawmakers that they support Gov. Jerry Brown’s vision of a strong retirement system.  At the same time, the group expressed concerns about
the governor’s pension proposals.

Coalition members want to ensure that any changes made to the California State Teachers’
Retirement System do not diminish the state’s ability to recruit teachers to our communities’ schools.

Photo and Story by Len Feldman