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March 24, 2013
Editorial: State must fix liabilities that loom at CalSTRS

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(March 24 -- By the Editorial Board)

The unfunded liability at the California State Teachers' Retirement System is $73 billion currently and growing at the astonishing rate of $17 million per day. If corrective action is not taken - that is, if the state, school districts or teachers don't contribute more into the fund - CalSTRS could deplete all its assets by 2044.

The spreading red ink at the teachers' retirement system "may be the state's most difficult fiscal challenge," the Legislative Analyst's Office warned in a recent report.

Lawmakers have ignored the deepening crisis for years. They cannot afford to do so any longer.

Delay merely swells the cost of the eventual fix. When and if the fund runs out, the state is still on the hook. State government will be obligated to pay teacher pensions out of the state's general fund, leaving less for other vital services such as schools, public safety, roads, health and welfare.

To return CalSTRS to fiscal health, the LAO recommends a combination of contribution increases mostly from the state and local school districts.

The fund needs $4.5 billion in additional contributions per year for the next 30 years to dig out of the hole it is in. That is a huge increase.

Combined with the $1.4 billion the state contributes to CalSTRS annually now, the total would exceed the entire state contribution to University of California and the California State University system combined, the LAO says.

It's unlikely the Legislature will approve contribution increases of that magnitude, but it must do something big and dramatic to stave off the consequences of allowing this obligation to balloon out of control.

There's one aspect of the CalSTRS funding woes that the LAO does not address - illegal pension spiking not by teachers but mostly by top-ranking school administrators. A recent audit by the State Controller validated reports in The Bee that CalSTRS routinely ignored large end-of-career pension-padding schemes that its own system had flagged.

As it struggles to tackle the massive CalSTRS shortfall, the Legislature ought to insist that CalSTRS reviews all high-end pensions to make sure that the state is not paying out more in retirement than is owed. It also needs to increase and improve school district audits to better detect spiking before the system is fleeced.

Such reforms don't just protect taxpayers, but teachers. After all, it's their salaries and benefits that are likely to be cut to pay off massive pension debt.

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