The Teachers' Retirement Board is committed to a comprehensive strategy to address the long-term
funding gap, which in fiscal year 2006-2007 was $20.7 billion. This is the amount of projected
income available to pay current benefits for the next 30 years.
But CalSTRS is a sound
pension system with an 88 percent "funding status." A funding status more than 80 percent is
considered "healthy" by most experts, according to a recent
Pew Charitable Trusts report.
Despite the good news on CalSTRS' funding status, a comprehensive, long-term solution is needed to
address the long-term problem. Therefore, the
Teachers' Retirement Board has taken action on several fronts.
Current Benefits Will Not Be Cut
The board is committed to not decrease benefits to California's educators and their families.
California's educators receive about 60-65 percent of their final salary in retirement. And as
members do not earn Social Security, they rely on CalSTRS as their only guaranteed source of
retirement security. The
board is acting to ensure a healthy and secure fund for CalSTRS members.
Tactics for Success
- Change to a more aggressive asset mix in the investment portfolio.
- Increased diversification means more opportunities for private equity and real
estate investments.
- Changing the investment mix can realize positive long-term returns.
- Seek authority to set predictable contributions rates within limits.
- An incremental and phased approach is needed to address the strategy’s efficacy
in reducing the funding gap.
- Build understanding and agreement with stakeholders.
- Collaborate to address school funding and budget constraints concerns.
Financial Turmoil Affects Funding Gap
The recent economic downturn confirms that relying on exceptional investment returns is not a
viable strategy to reducing the gap. While members’ retirement benefits won’t change as a result
of the downturn; the longer we wait to address the gap, the higher the cost.
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