Prop 30 "Excess Revenue" Going to Prevent CalSTRS Bankruptcy- Not To Students As Promised

Under this May Revision, state revenues are forecast to increase by $2.4 billion. The Governor's May Budget Revision sets forth a plan of shared responsibility among the state, school districts and teachers to shore up the teacher pension system. The first year’s increased contributions from all three entities are modest, totaling about $450 million. The contributions would increase in subsequent years, reaching more than $5 billion annually.

Source:Page 3:  http://www.ebudget.ca.gov/2014-15/pdf/Revised/BudgetSummary/FullBudgetSummary.pdf

Shoring Up Teacher Pensions

In its 101‑year history, the California State Teachers’ Retirement System (CalSTRS) has rarely been adequately funded — meaning that expected contributions and investment returns have not been equal to expected pension payouts. As shown in Figure INT‑01, the system was only 29 percent funded as recently as 1975. The system did reach full funding (100 percent) for a few years around 2000 because of exceptional investment returns and higher contributions in the preceding years. Yet, reduced contributions, benefit enhancements, and stock market crashes have reduced the system’s funding status to its current 67 percent and set it on a consistent downward trajectory.

Unlike other pension systems, contributions to CalSTRS are set in state law, and contributions from school districts and teachers do not automatically adjust to ensure the system’s revenues meet its required expenditures. If no action is taken, it is projected that the system will run out of money in 33 years.

To counteract this dire prospect, the May Revision sets forth a plan of shared responsibility among the state, school districts and teachers to shore up the teacher pension system. The first year’s increased contributions from all three entities are modest, totaling about $450 million. The contributions would increase in subsequent years, reaching more than $5 billion annually. Total contributions today equal 19.3 percent of teacher payroll and will rise to 35.7 percent. This would eliminate the unfunded liability in approximately 30 years.