Solving teacher retirement system's shortfall would cost billions

When Gov. Jerry Brown talks about paying down the state’s “wall of debt,” he doesn’t mention the state teachers’ retirement system. And yet the towering $73 billion unfunded shortfall in the state pension fund for teachers and administrators, the California State Teachers’ Retirement System, makes Brown’s wall, at about $30 billion, look like a picket fence.

On Wednesday, at a joint legislative information hearing, speakers from CalSTRS, groups representing educators, and the Legislative Analyst’s Office urged the Legislature to act now to address the outstanding liability. If nothing is done, CalSTRS won’t have enough money to cover the retirement benefits it promised to the teachers and administrators who will one day be drawing it down. Fully restoring the financial health of the pension fund will be tremendously expensive – requiring $4.5 billion to $5 billion annually in additional contributions, primarily by school districts and the state.

This 10-year graph shows the swings in investment income from gains in the early 2000s to losses after 2008 market plunge. This past year, which is not shown, the fund rebounded, with a 13.5 percent return. The blue line shows the payout to recipients has exceeded contributions to the system (red line). More money is needed to keep the system solvent in 30 years. Source: Auditors' report to CalSTRS for the year ending June 30, 2012 (click to enlarge).

This 10-year graph shows the swings in investment income from gains in the early 2000s to losses after the 2008 market plunge. This past year, which is not shown, the fund rebounded, with a 13.5 percent return. The blue line shows the payout to recipients has exceeded contributions to the system (red line). More money is needed to keep the system solvent in 30 years. Source: Auditors’ report to CalSTRS for the year ending June 30, 2012. (Click to enlarge)

That amount is almost as much as the state expects to bring in from annual revenue from Prop. 30; it is more than what the state spends now for the UC and CSU systems combined. But the alternative is worse, said the speakers. Each day of failing to act to replenish the defined benefit fund increases the liability by $17 million and moves a step closer to 2044, when the pension fund would run out of money.

The dilemma, of course, is how to come up with that magnitude of dollars when the state and school districts are recovering from cuts in education and state services, and when Gov. Jerry Brown has ambitious plans, assuming additional revenue, for reforming the state’s school finance system. There will also be the challenge of how to divide the burden of higher contributions among the state, school districts that contribute as employers, and, to a lesser extent, teachers.

Even if Brown and the Legislature decide to delay or phase in additional money, it’s important that legislators commit formally to action, said Ed Derman, deputy chief executive of CalSTRS. A secondary benefit is that bond rating agencies would recognize that districts and the state have a plan to remove a liability hanging over them.

“There is a big benefit of making a decision now,” agreed Assemblymember Bob Wieckowski, D-Fremont, a first-term legislator who also is a bankruptcy attorney.

Legislative Analyst’s Office analyst Ryan Miller suggested that the Legislature make contributions to CalSTRS a higher priority than repayment of other state bonds, which have fixed interest rates or grow more slowly than CalSTRS’ unfunded liability.

Digging out of its hole

CalSTRS’ defined benefit fund lost about a quarter of its value when the market plunged in 2008. Though it has largely recovered to where it was in 2008 – the market value was $161.5 billion on Feb. 28 – it lost five years of compound growth, leaving it only 66 percent funded to pay long-term obligations as of February. To meet its commitments to retirees and current employees, CalSTRS relies 60 percent on the growth in investments and 40 percent on contributions. CalSTRS assumes a return of 7.5 percent on investments – a rate that some analysts already consider too optimistic. Investment returns would have to average 10 percent annually for 30 years to wipe out the shortfall without raising contributions.

In a report to the Legislature, CalSTRS’ board of directors outlined eight options for restoring the fund, seven of which would either set a target at less than full funding or a goal of full funding in 75 years. The preference of the CalSTRS board, the non-partisan LAO and outside actuaries, as the most prudent option, is full funding in 30 years. It is also the most expensive. The other choices, Miller said, shift the responsibility for current commitments to future generations. And a lower repayment, with a goal of 80 percent funding, would leave the fund more vulnerable to another plunge in market values, the analyst said.

Bonta, who chairs Assembly committee overseeing public pensions, says that a target of 80 percent funding in 30 years may be more realistic.

Rob Bonta, who chairs the Assembly committee overseeing public pensions, says that a target of 80 percent funding in 30 years for CalSTRS’ pension fund may be more realistic.

But a goal of 80 percent funding in 30 years would also reduce the need for additional contributions by nearly $1 billion a year, to $3.6 billion, down from $4.5 billion. “The solution becomes more doable,” Assemblymember Rob Bonta, D-Oakland, who led the hearing, said in an interview Thursday. Bonta, who chairs the Assembly Public Employees, Retirement and Social Security Committee and will eventually introduce a bill on the issue, said that he believes, from discussions with employee and employer groups, that they could accept a target of less than full funding. Any action would not take effect until July 1, 2014 at the earliest, he said.

Contributions to the fund currently total $5.7 billion. School districts’ share is 8.25 percent of teachers’ and administrators’ pay, for $2.2 billion; teachers contributed 8 percent of their pay, $2.1 billion; and the state currently pays 2.7 percent of pay, $1.4 billion. The state also pays an additional 2.5 percent into a separate inflation protection account for members.

Implementing full funding immediately would require upping the contributions by $4.5 billion. But phasing in additional contributions over several years would raise the eventual annual increases by an additional $500 million, to more than $5 billion.

Dividing the increase proportionally or even-steven won’t work, because courts have ruled that current employees have a vested right to their present benefits, and new employees won’t be contributing enough to make a difference quickly – if the burden for the shortfall were shifted to them. The CalSTRS board did conclude that, with some complicated legal moves, the Legislature could raise the teachers’ contributions a few percentage points of pay. But even that would only be about one-seventh of what’s needed for full funding.

Districts will also have a legal case against making them shoulder the burden within their existing budgets. Daniel Vandekoolwyk, deputy legislative counsel for the Office of the Legislative Counsel, which provides legal advice to state government, told the committee that Proposition 98, the voter-approved funding guarantee for schools, protects districts from the state adding responsibilities without providing money for them. So the Legislature would have to fund any increases it mandates to employers’ share of contributions.

With the state’s General Fund then carrying the burden of the $4.5 billion in increases, lawmakers face hard choices.

Sal Villaseñor, legislative advocate for the Association of California School Administrators, while urging legislatures to commit to full funding in 30 years, said changes in contribution rates should be incremental. He also said that the contribution formula should be reexamined every decade to see whether it should be adjusted up or down.

Bonta agreed that additional increases should be phases in “to avoid sticker shock.” If current forecasts for several billion dollars in unexpected state revenue this year prove accurate, he said, it would be smart to channel a portion to pay down the CalSTRS shortfall. The sooner the Legislature acts, the less the state will owe in the long run, he said.





Filed under: Pay and Tenure, School Finance, Teaching



Leave a Comment

Your email address will not be published. Required fields are marked *

Comment Policy

EdSource encourages a robust debate on education issues and welcomes comments from our readers.

  • To preserve a civil dialogue, writers should avoid personal, gratuitous attacks and invective.
  • Comments should be relevant to the subject of the article responded to.
  • EdSource retains the right not to publish inappropriate and offensive comments.
  • EdSource encourages commenters to use their real names. Commenters who do decide to use a pseudonym should use it consistently.
  • Please limit comments to 250 words to prevent comment clutter; if you intend to say more please link out to a place that contains your full comment.
  • Comments with more than one link automatically enter moderation. Comments from new commenters are automatically moderated.
  • Repeated violation of this comment policy will lead to a warning. Continued violations will lead to a ban.

30 Responses to “Solving teacher retirement system's shortfall would cost billions”

EdSource does not track who "likes or dislikes" a comment. We only track the number of likes and dislikes.

  1. Gary Ravani on Mar 26, 2013 at 12:57 pm03/26/2013 12:57 pm

    • 000

    LOL, TL, when you have cradle to grave health care, generous family leave and unemployment insurance, generally low poverty and very low child poverty rates, and wrap around social services, and pensions 9of course!), just how difficult is collective bargaining going to be?

    Public sector unions are just trying to provide the kind of care to their members that the social democracies extend to all of their citizens as a matter of human rights and dignity. In a laissez faire, generally social Darwinist political environment that takes some tough bargaining. It is good for the state as well as the nation though.

    To your comments about public sector unions being a “cancer.” It doesn’t take much research to establish that those states without public sector collective bargaining, nine of ten of which are in the deep south (those cradles of civilization), you also find the lowest state GDPs and per capita incomes. On the other end of the spectrum you have states like CA, with strong public sector unions (with all that entails), high GDP and high per capita incomes.

    And so goes your education TL. Have a nice day.


    • Tough Love on Mar 26, 2013 at 9:58 pm03/26/2013 9:58 pm

      • 000

      Gary, My comment that Public Sector Unions are a Cancer on Society relates to their detrimental financial impact on the well being of Private Sector Taxpayers.

      There are a great many reasons for the GDP differences between the Coastal States and the deep South, and very few have anything to do with Unions.

  2. Tough Love on Mar 25, 2013 at 9:47 pm03/25/2013 9:47 pm

    • 000

    Gary, Perhaps it succeeds in Scandinavia because the Public Sector Unions/workers don’t have the insatiable greed rampant in the Public Sector in the USA.


    • navigio on Mar 26, 2013 at 1:05 pm03/26/2013 1:05 pm

      • 000

      Interesting discussion guys, more later. Quickly however, insatiable greed is pretty much a virtue in our culture. Has nothing to do with public vs private sector. That’s the real difference that you are highlighting by comparing us to most european nations. That impacts the societies in almost every possible way imaginable.

  3. Gary Ravani on Mar 25, 2013 at 5:52 pm03/25/2013 5:52 pm

    • 000


    The world’s “social democracies” are considered to be in Northern Europe, for example: Switzerland, Finland, and the Netherlands (S/F/N).

    None of the countries you listed would be in that group.

    They are considered social democracies because they expend considerably more on various social services than do the more social Darwinist countries like the US. Examples might be: in S/F/N the average tax revenue collected as % of GDP averages 37% where in the US it is 27%; in S/F/N government consumption is 16% of GDP whereas in the US it is 11%; in S/F/N social welfare expenditures as a % of GDP average 22% whereas in the US it is 16%.

    (Journal of Politics and Policy)

    So, in the dog eats (conservative/libertarian) dogma US it is morally OK for the nation to rank 31st of the 32 most industrialized nations in childhood poverty. After all, those kids should just pull themselves up by (since they don’t have boots yet) the little yarn thingies on their booties. Ayn Rand would be proud, even if the rest of the “civilized nation” (discounting conservatives/libertarians here) is in deep shame.

    Of course, becoming a “social democracy” might paralyze US international competitiveness. After all, my original point was the social democracies had weathered the economic crisis better than the US had. Yikes! What’s this I see? The World Economic Forum, the body that ranks nations by their international economic competitiveness, ranks Switzerland # 1 in the world in international economic competiveness, followed by Finland at #3, and Netherlands at # 5. The US trails at #7.

    What was that about “rocks?”

    All that pesky socialism and they are better capitalists than we are. Ayn must be spinning in her grave.

  4. Gary Ravani on Mar 25, 2013 at 12:21 pm03/25/2013 12:21 pm

    • 000

    Actually, TL, those nations called social democracies who guarantee healthcare, pensions, cradle to grave social services, parental leave, early care and pre-school, etc., etc., have weathered the economic crisis better than the US where unfortunate and predatory social Darwinism so often prevails.

    Obviously that perpetuates the poor performance of the economy that fails the middle classes and devastates to poor. Unionized workers in both the public and private sectors are among the few bright spots.


    • Tough Love on Mar 25, 2013 at 1:06 pm03/25/2013 1:06 pm

      • 000

      So you believe those nations have fared well ? Well Greece, Italy, Spain, Portugal, and Cyprus, all with MAJOR financial disruption (considerably worst than the USA … at this time) suggest otherwise.

      Have you been living under a rock ?

      While I am at best neutral with respect to Private Sector Unions, where at least adequate attention is paid to not financially killing the host (the Corporate employer and Pension Plan sponsor), those controls don’t exist when it come to Public Sector Unions. Public Sector Unions function ONLY to demand more and more and more, and the Taxpayer be damned. As such Public Sector Unions are nothing but a CANCER on Society.

  5. Paul on Mar 24, 2013 at 12:08 pm03/24/2013 12:08 pm

    • 000

    The recent report by STRS (elsewhere on this blog) points out the weakness of Social Security: pay-as-you-go funding. Current SS tax revenues are used for current benefits. Leftover revenue is spent on general federal expenses.

    Since pension plans like STRS rely on investment returns in addition, the overall cost is lower. A dollar of retirement income for a teacher (STRS only) costs all parties much less than a dollar of retirement income for a general California public sector worker (PERS + SS).

    Extending SS to all employment is not a solution. Correcting the windfall elimination provision to allow a mix of covered and non-covered employment is part of the solution.

    The other part involves requiring employers to set aside, for all non-covered employees, an amount equivalent to the employer SS tax (6.2%). In this regard, a great many teachers — the up to 50% who leave the profession in their first 5 years — are cheated, because they forfeit all employer contributions.

    On a separate note, arbitrary actions such as cutting future benefits by 50% fly in the face of actuarial reality. STRS sputtered because of the recession; now, previously-accrued benefits are partly unfunded. If benefits currently being accrued are also partly unfunded, the underfunding rate for this segment of the pension plan is certainly much less than 50%.

    I think that teachers, even at our low salaries (starting at $37 to $42K with 5 years of postsecondary education is a tall order), would accept a nominal increase to the 8% employee contribution rate. Many of us have not received cost-of-living raises in years, many of us have endured periods of un-/underemployment, and all of us have faced workload increases. So, a pay increase and/or some class size relief would make this more palatable.

    Districts, clearly, cannot afford to increase the 8.25% employer contribution rate without restoration/addition of state funds.

    In the end, the public will have to decide what sorts of teachers it wants. Perhaps Tough Love believes that an army of untrained, unbenefitted minimum wage workers would suffice — or perhaps he can afford private school for his family. Caveat emptor. Cutting/capping compensation is inconsistent with the political drive to exert more professional control over teachers.


    • Tough Love on Mar 24, 2013 at 1:06 pm03/24/2013 1:06 pm

      • 000

      Paul, Some of your ideas might fly, but not until the Teacher’s Unions stop protecting the deadwood (hanging in just for the pensions) and the clearly incompetent …. who should simply be fire…. jsut like they would be in the Private Sector.

      Public Sector Unions are a CANCER on Society.

    • jskdn on Mar 26, 2013 at 9:41 am03/26/2013 9:41 am

      • 000

      Putting teachers isn’t a solution for the financial problems of teacher’s retirement, quite the opposite, which is why their representatives seek to avoid it. I advocate it for the sake of fairness. People who are paid at the level of teachers would be net contributors to the system on average. And it’s hypocritical that the Democratic Party, which is the most staunch advocate of Social Security, helps keep it’s most important special interest group from sharing in the burden of the program. So much for the credibility of the “fair share” party. There’s no good reason why they should be exempt from a government program that’s mandatory for everyone else in the country. Peter Orszag and Peter Diamond include bringing state and local government employees into the system in their detailed plan to make the Social Security solvent.

      • Tough Love on Mar 26, 2013 at 9:28 pm03/26/2013 9:28 pm

        • 000

        Sure there’s a reason Teachers are exempt from SS (but no a GOOD one). The reason our elected officials have kept teachers out of SS is because they are responding to the wishes of their payees (the Unions, via campaign contributions) because, as you said, being in SS wouldn’t benefit teachers as they would be net “contributors”.

  6. jskdn on Mar 23, 2013 at 12:48 pm03/23/2013 12:48 pm

    • 000

    The $30 billion ‘wall of debt’ and the $73 billion in unfunded pension liabilities aren’t nominally comparable because of the difference in the costs of carrying each debt. The way I understand it, a fully funded pension system is one that has enough assets on hand so that if those assets earn the assumed rate of return, 7.5% in the case of CalStrs, the funds will be sufficient to meet the pension obligations that have incurred to date, that is for employment already completed. But unfunded part is also subject to that 7.5% rate of return. So absent the assets that are on hand earning more than that, the fund would needs a payment of around $5.5 billion a year on that $73 billion just to keep it from growing any larger on a compounding basis. More would be needed to amortize the debt. I’ll just note, that the most serious effort to deal with it being proposed would have people paying over the next 30 years for compensation of employment that is already in the past. And it appears that limiting past employment costs to “only” 30 years into the future won’t be the choice taken by California government. Instead it seems that they will likely act like “pick-a-payment” mortgage borrowers did and choose a negative amortization option.


    • Tough Love on Mar 23, 2013 at 2:54 pm03/23/2013 2:54 pm

      • 000

      jskdn, You understand this situation we are in quite well.

      Any “solution” that can really work MUST include a very significant reduction in the promised pensions …. (a) an immediate 50% reduction in the accrual rate for FUTURE service of ALL CURRENT workers, and (b) as financial circumstance demand, pension reductions for those already retired and applicable to the past service accruals of those still active.

  7. Tough Love on Mar 23, 2013 at 5:50 am03/23/2013 5:50 am

    • 000

    Private Sector pensions RARELY exceed 40% of final average earnings even after 35 years. … and with NO COLAs … and generally no retiree heathcare subsidy.

    Reduce the promises Public Sector pensions (for Future service of CURRENT workers to a level (as a % of pa) no greater than what the Taxpaying Private Sector workers typically get.

    Public Sector workers earn no less in cash pay than their Private Sector counterparts (especially teachers). So what entitles them to greater pensions and better benefits on the Taxpayers’ dime ?


    • John Fensterwald on Mar 23, 2013 at 10:15 am03/23/2013 10:15 am

      • 000

      Tough love: CalSTRS does not offer retiree health care; most, if not all districts (there may be exceptions) don’t offer this either. Teachers do not receive Social Security benefits (they don’t pay into the system either), and those who have paid into Social Security, either through summer jobs or previous jobs, lose a substantial portion of these benefits when they retire, under a quirk in federal law. It’s important not to generalize on public employee benefits. There are important distinctions.

      • Tough Love on Mar 23, 2013 at 10:33 am03/23/2013 10:33 am

        • 000

        It’s true that (even though Public Sector pensions are ALWAYS far greater than those of their Private Sector counterparts) there are differences in Richness among the various Public Sector Plans with CalSTIRS toward the lower end in CA.

        Several of your other points are wrong or misleading:

        (1) For other than the lowest paid workers, SS is a bad deal so NOT being in it is a PLUS, not a negative for Public Sector workers.
        (2) Any SS reduction for Public Sector workers falls under one of 2 SS “Windfall Elimination” provisions. That name is what SS calls them BECAUSE they “eliminate” an otherwise UNJUST WINDFALL …. they are NOT are penalty as most Public Sector workers make them out to be.
        (3) The 6.4% that Public Sector workers did not contribute into SS (vs Private Sector workers) is 6.4% of pay more in their pocket that they could have (and SHOULD have) saved for their retirement. The accumulated amount (with investment earnings) should be considered as available to and part of a public Sector workers’ retirement assets. To the extent that those funds were not saved and invested is a problem for the worker to deal with, not something the Taxpayers should make up for … e.g. you had the money (by not contributing). You should have saved it. If you didn’t, it’s YOUR problem.

        And interestingly, you didn’t challenge my main conclusion:

        “Public Sector workers earn no less in cash pay than their Private Sector counterparts (especially teachers). So what entitles them to greater pensions and better benefits on the Taxpayers’ dime ?”

        Could that be because their is no real way for you to effectively respond ?

        • Gary Ravani on Mar 23, 2013 at 12:34 pm03/23/2013 12:34 pm

          • 000


          A very smart person once said, “If you can get people to ask the wrong question it doesn’t really matter what answer they come up with.” Your positions re public sector pensions is a classic example of that syndrome.

          The real questions is not “why do public sector workers have pensions,” the question is “why don’t private sector workers have pensions any longer.”

          At one time private sector workers had comparable pension arrangements to public sector workers because they were a part of union contracts. Many private sector workers allowed their unions to to be disbanded, in large part because they were distracted by wedge social issues and became “Reagan Democrats.” Plainly they were suckered. The dollars that used to go to private sector pensions are now retained by corporations and business which contributes to ever greater profits, ever flattening (if not declining) wages and other compensation, and ever increasing disparities in incomes and accumulated wealth.

          Public sector workers have kept their unions and their pensions. As to earnings in the public sector and private many valid studies indicate higher paid public sector workers have increased levels of education and seniority compared to private sector workers which accounts for many disparities. The fact is though, critics try to point at only the highest levels of public employees and the majority have relatively low levels of compensation.

          The continued repression of private sector workers compensation, and attempts to do so in the public sector, are major contributors to the continued economic doldrums of the US economy, based as it is on 70% consumption. Your philosophy is not about “love” in any way, and even the “tough” is more about mean spiritedness. The “austerity” you advocate has not worked in the US economy and is contributing to
          to the European economic crisis.

          Try reading something besides Ayn Rand.

          • Tough Love on Mar 23, 2013 at 2:46 pm03/23/2013 2:46 pm

            • 000

            Gary, Rarely do I see so many flawed argument in one comment:
            (1) 85% of the working population are Private Sector workers. THAT group should be the reference point for what Comparable Public Sector should be paid. While your point is understood, Corporate America is not goign to increase their workers’ pensions, and there is ZERO reason for taxpayers to compensate YOU at a levewl greater than what they get.
            (2) You said … “Public sector workers have kept their unions and their pensions.” So far, what I see is a future of pension “promises” that will be partially (but not fully) honored because the money is not there now and never will be. I hope you have saved outside that pension
            (3) Most teachers who have Master’s degrees have them in “education”. Try getting one in math, chemistry, or physics.
            (4) Europe’s financial mess is 100% due to the completely absurd retirements promised their workers and the absurd size of the gov’t workforce.

            P.S. You have a severe case of “entitlement mentality”.

            • Jane E. Lotz-Drlik, Ed.D. on Feb 15, 2014 at 5:30 pm02/15/2014 5:30 pm

              • 000

              At the risk of being trite, Tough Love et al, there are fewer teachers entering the profession each year. The ones who stay long enough to gain a couple of years’ experience (otherwise known as the teachers who parents request for their children) are generally expected to compensate for, solve, or overlook their students’ personal difficulties, family challenges, and lack of preparation for each school day. These challenges transcend socio-economic background and the language/immigration issues that tend to become the focus, so as to avoid grappling with issues of inequity and legislative mismanagement.

              The state pledged to funding pensions at an agreed-upon level. Reneging on that pledge and hiding mismanagement is the issue. Late-in-the-game criticizing of teachers’ “entitlement mentality” and comparisons between “public and private sector” finances constitutes a wornout evasion.

              So does cricizing teachers’ education levels. Many teachers hold Master’s degrees in the sciences, as well as in other content areas. Perhaps you need to try learning more about educational training, rather than echoing sentiments voiced by those who consider themselves knowledgeable simply because they once attended school.

              I have yet to hear or read any private/public sector comparisons made by people enrolling their children in public schools with the expectation that teachers will give their children the highest-quality education and accommodate all of their needs. Nor are such comparisons being made by those who take public education for granted.
              Corporate greed, governmental pandering to special interests, and economic disaster grounded in business mismanagement isn’t solved by blaming teachers’ retirement systems and reneging on pension funding.
              that was promised, and upon which teachers depend.

              Or do you plan on taking responsibility for educating all of the state’s children?

        • JoJo on Aug 29, 2013 at 10:06 pm08/29/2013 10:06 pm

          • 000

          It depends on the year you retire and your birth year. The IRS “windfall” has an age factor. My mother received nothing from all the years of SS summer and holiday contributions and her full-time work prior to becoming a teacher.

          SS contributions depend on your district. I was required to pay into BOTH SS and CalSTIRS — guaranteeing that I lose my SS contributions due to the IRS windfall provisions. NO other public service workers I’ve talked to must contribute to both or have SS payments reduced, including law enforcement and fire fighters.

          Many states give state tax credits to retired teachers. CA does not. Retired teachers must pay full tax on CalSTIRS pension payments.

      • jskdn on Mar 23, 2013 at 12:50 pm03/23/2013 12:50 pm

        • 000

        The Windfall Elimination Provision and Government Pension Offset aren’t quirks in federal law. To the contrary, they are designed to stop the quirk of gifting other people’s money to government employees who aren’t in Social Security for most of their working years. Social Security is partly an income redistribution system to lower lifetime earners and treating government employees income that was subject to Social Security without regard to their income out of the system resulted in large windfalls. These adjustments might need to be refined but the principle behind them is sound.

        • John Fensterwald on Mar 23, 2013 at 3:41 pm03/23/2013 3:41 pm

          • 000

          Thanks for the explanation of the Windfall Elimination Provision, jskdn. I do think that acknowledging the need for a “refinement” understates the penalties that teachers who earned Social Security benefits face, especially those who make mid-career changes. The provision is a disincentive to going into teaching.

          • jskdn on Mar 24, 2013 at 9:54 am03/24/2013 9:54 am

            • 000

            The GAO reported that Social Security needs accurate information about non-covered employment to refine the calculations. But instead of acting to fix actual unfairness that might accrue to some who worked substantially in both covered and non-covered employment, there has been a shameless attempt by some, including many politicians, to make it seem as if there isn’t a valid rationale behind these provisions. That rationale should be obvious to anyone with a modicum of understanding of how Social Security calculates benefits by using averaged adjusted lifetimes earnings and applying the 90%,32% and 15% bend point rates to that income to determine benefit amounts. It’s also why all employment should be covered. Here’s something from that GAO report that cites the need for earnings information.


            “One of Social Security’s most fundamental principles is that benefits reflect the earnings on which workers have paid Social Security taxes.
            At the same time, Social Security helps ensure that its beneficiaries
            have adequate incomes. Social Security’s benefit provisions
            redistribute income in a variety of ways–from those with higher
            lifetime earnings to those with lower ones and from those without
            dependents to those with dependents. Such distributional effects
            depend, to a great extent, on the universal and compulsory nature of
            the program. Noncovered employment has unintended effects on these
            distributional outcomes. Accordingly, Social Security uses the GPO and WEP to take noncovered employment into account.”

  8. eatingdogfood on Mar 22, 2013 at 5:54 pm03/22/2013 5:54 pm

    • 000

    Isn’t It Time For The Abused Taxpayers Of California To Leave In Masses.
    In Order To End This Unholy Conspiracy Between The Totally Corrupt.
    Democrats And The Equally Corrupt Public Service Unions? It Is Really.
    The Only Way To Finally End This Criminal Activity! Did Anybody Ever.
    Hear Of RICO?

  9. Paul on Mar 22, 2013 at 11:28 am03/22/2013 11:28 am

    • 000

    For once I didn’t say it first!

    Favoring temporary service, not taking truly effective steps to reduce attrition, and not refunding employER contributions to teachers who leave the profession before vesting ( < 5 years ) are excellent ways to save money.

    Districts benefit in the short term, from an average teacher salary kept low by turnover. STRS and its guarantor, the state, benefit in the long term, from reduced pension obligations.

    The only ones who lose are students and their new, temporary teachers.

    It's important to remember that teachers, unlike other California public sector workers, have always contributed diligently to their pension plan. For over a decade, UC and its UCRS-covered employees took a complete pension contribution holiday. Even today, municipal and general state employees contribute a smaller share of their retirement costs (PERS + SS) than do teachers (STRS). With teachers earning less than toll-takers, bus drivers, firefighters, police officers and so many other public employee groups, the 8% pension contribution that they have sustained for the past few decades is commendable.

    It's also important to recognize that school districts pay only 2 percentage points more toward teacher retirement than would private employers without pension plans (district: 8.25% to STRS, 0% to Social Security; private company without pension plan: 0% to pension, 6.2% to SS). Teachers are cheap talent, indeed!

    Fixing STRS would cost real money, and if taxpayers and voters truly valued teachers, the state would pay up. Since it is after all a very distant future liability, funding the pension plan each year at a level that would allow projected benefits to be paid over the following 30 years would be a fiscally responsible solution. 100% funding is not necessary.

  10. Paul Muench on Mar 21, 2013 at 8:51 pm03/21/2013 8:51 pm

    • 000

    Is there any reason for teachers to compromise? Why give up a court-guaranteed benefit? Maybe they will take action out of the goodness of their own generous hearts. But that is wishful thinking. If we want to live up to our legal obligation we’ll likely need to redirect the prop 30 funding to pensions. I think prop 38 would have prevented this type of solution, but I think that solution works for prop 30. True? If we don’t intend of live up our legal obligations then better to wait and break them at the last possible minute. Well, seems like I’ve come full circle and answered my own question. Probably the only motivation for teachers to strike a deal now is the fear that only a worse deal will come later. We’ve really managed to get ourselves into a mess to have to think this way.


    • navigio on Mar 22, 2013 at 10:16 am03/22/2013 10:16 am

      • 000

      Of course there is an ‘easy’ solution. Modify the incentives for teaching such that fewer people stay in the ‘profession'; preferably less than 5 years since in some systems, one can retire after 5 years service if one is over a certain age. Hire a bunch of these newer, lower-paid, temporary-style teachers. Have them pay into the retirement system for a couple years. Then when they leave they will get back their contributions, but the retirement system gets to keep the contributions from the districts. Those who leave early will never become a ‘burden’ on the system, but will help to financially support it, if only in a small way. Thus, if we make sure we can do this for long enough, we can eventually let the ‘existing burden’ ‘expire’. The one drawback is of course that these lower-paid teachers will also have proportionately lower contributions, so it will be tricky to pull this off during the transition. I know its kind of a wacky idea, but hey, it seems like maybe someone already thought of it…?

      Btw, I dont believe the state is serious about backstopping either STRS or PERS.

      • John Fensterwald on Mar 22, 2013 at 10:20 am03/22/2013 10:20 am

        • 000

        Who might that someone be, navigio?

        • navigio on Mar 22, 2013 at 11:20 am03/22/2013 11:20 am

          • 000

          Its a great question John. Maybe a good topic for some investigative journalism? 😉

          Sarcasm aside, I am not sure whether to actually give any of the players involved credit for enough foresight to hatch such a plan, though I think, at minimum, the effects of their efforts have led to the ‘solution’ sort of falling into their laps.

          There are a lot of things that happen in public education in which the (ostensibly unintended) negative consequences are so severe that one has to question whether it was the intent all along. Im not really a conspiracy theory kind of person because I think its possible to be wrong even with good intentions. The important thing is to understand the actual effects. That said, when you read quotes talking about former federal secretaries of education (bennett) that say, “I asked him to support the bill in the crucial stage when we needed Republican allies. He told me he would not help, because he did not want public schools to obtain new funding, new capability, new tools for success. He wanted them, he said, to fail so that they could be replaced with vouchers, charter schools, religious schools, and other forms of private education.” Or other important players (norquist), “The real problem here is that you shouldn’t have government-run schools.” I think one really has to start questioning motivations, and more important, actions.

          I even think there are a couple reform leaders whose intentions have essentially been ‘co-opted’ by others. This thread is about the teacher retirement system though, so I’ll leave it at that. :-)

      • JoJo on Aug 29, 2013 at 9:57 pm08/29/2013 9:57 pm

        • 000

        Yep, let’s just hire a bunch of new teachers with little experience, fewer qualifications and minimal advanced training to save money. Who cares about the quality of the education in the classroom. Let’s just save a few bucks.

Template last modified: