Today’s Lesson….The Facts About CalSTRS Pensions

Today’s Lesson … The Facts About CalSTRS Pensions

During my 31 years as an educator I taught my students using facts – dates and figures that could be substantiated. Facts are what we should focus on now as we discuss pensions. Grandstanding and exaggerations have no place in a discussion about something as important as the financial health of our state and its citizens. And “one size” definitely does not fit all when describing the different systems. CalSTRS is different.

The California State Teachers’ Retirement System (CalSTRS) has been providing retirement security for more than 97 years, even through the Great Depression. Here are some facts about CalSTRS and educators’ retirements:

• CalSTRS earned 8.2 percent over the past 20 years and 12.7 percent last year. The CalSTRS pension fund is not in immediate crisis. It has assets to pay benefits for at least the next 30 years.

• As a percentage of payroll the state is paying less now (roughly 2 percent) than it did 14 years ago when the state paid 4.3 percent of payroll.

• I paid for my CalSTRS retirement with 8 percent of my monthly paycheck. That is higher than private-industry workers pay into Social Security.

• CalSTRS retirement benefits are based on age, years of service and final pay. The formula used is 2 percent of pay, not the higher percentages you often hear about.

• Most CalSTRS retirees don’t receive their own nor their spouse’s earned Social Security benefits (they are penalized for being teachers via the Windfall Elimination Provision and Government Pension Offset).

• Just as private-sector retirees rely on Social Security, teachers rely on their CalSTRS pension to remain self-sufficient.

• Most CalSTRS retirees don’t receive any employer paid health care.

• CalSTRS is already a hybrid retirement plan with a defined benefit formula for one type of compensation and a cash balance plan for other compensation that is similar to a 401(k). The system was created to avoid pension spiking.

• CalSTRS has actually cut retirement benefits in the past year. Most of the CalSTRS benefits that were provided in 2000, at the peak of the dot com boom, were limited term benefits and have sunsetted. Those who earned the benefits prior to the sunset will receive them; however, no new retirees can earn those benefits.

Opponents of public pensions have lumped all the pension systems together in their attacks, yet CalSTRS is very different in their formulas and benefits. Even the California Foundation for Fiscal Responsibility is quoted as saying, “Teachers have a more modest formula, and it has been fixed for a number of years now.” (North County Times, 1/10/11).

I am a proud member of the California Retired Teachers Association (CalRTA), which sponsored the Elder Full Funding Act that brought CalSTRS to full funding in 1998.  CalRTA has every expectation that Governor Brown will find a funding balance now that is fair to taxpayers and fair to workers, just as we have experienced in the past.

Retirement plan opponents believe that all public retirement systems are the same.  The facts don’t support that argument.  CalSTRS is different.

Polly Bacich

President

California Retired Teachers Association