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Taking action to reduce California’s long-term fiscal liabilities, Governor Edmund G. Brown Jr. today signed AB 1469, which fully funds – over a period of years – the teachers’ retirement system through annual contributions of school districts, teachers and state government.
“This bill will ensure a decent retirement for hundreds of thousands of teachers, both now and for decades to come,” said Governor Brown.
Before this bill, the California State Teachers’ Retirement System (CalSTRS) was only 67 percent funded and would have run out of money in 33 years.
Under the legislation, authored by Assemblymember Rob Bonta (D-Alameda), the first year’s contributions from teachers, schools and the state total approximately $276 million, growing in subsequent years to more than $5 billion annually. This is projected to eliminate the unfunded liability in the system by 2046.
“Our dedicated teachers work tirelessly to prepare our kids for college and career, and they deserve stability in their pension system,” said Senate President pro Tem Darrell Steinberg. “This shared responsibility between the state, teachers and school districts is a necessary step towards assuring the fund’s integrity, and will lift a huge burden from the state’s long term financial responsibility.”
“In January, Assembly Democrats made clear that kicking the CalSTRS underfunding can down the road had to stop, and that a comprehensive, solution needed to be approved this year,” said Assembly Speaker Toni Atkins. “With today’s signature by the Governor, CalSTRS escapes the downward spiral to insolvency and is now on a solid path to full funding. This shared solution, with the state, school districts, and teachers all contributing, provides greater retirement security to our dedicated teachers and more budget certainty to the state and our school districts.”
“As Chair of the Committee on Public Employees, Retirement and Social Security, I was proud to engage in a comprehensive effort with both houses of the Legislature and the Governor to address the CalSTRS’ $74 billion shortfall,” said Assemblymember Bonta. “AB 1469 puts CalSTRS on a course to fulfill the commitments the State has made to California’s educators for the invaluable service they provide to our students. Enacting this plan would not have been possible without the supportive participation of the leadership of both houses and the progressive vision of Governor Brown.”
“Recognition of CalSTRS’ financial stability as a priority demonstrates the Governor’s leadership and commitment to a sustainable retirement system for California’s educators,” said Harry Keiley, Chair of the Teachers’ Retirement Board. “This historic legislation allows CalSTRS to embrace its future with confidence and optimism knowing that a sound funding plan is firmly in place.”
The bill was included in the 2014-15 state budget, which the Governor signed in San Diego last week. The budget directs $1.6 billion into the state Rainy Day Fund – the first deposit into the fund since 2007 – and reduces the Wall of Debt by more than $10 billion. Under the budget plan, the Wall of Debt would be completely eliminated by 2017-18.
The bill follows the Governor’s call in February for the California Public Employees’ Retirement System (CalPERS) to begin accounting for demographic changes for state employees immediately, with the increased costs fully phased in within three years – instead of pushing the costs off into the future. The CalPERS board adopted the changes sought by the Governor.
In 2012, the Governor signed sweeping bipartisan pension reform legislation that saves billions of taxpayer dollars by capping benefits, increasing the retirement age, stopping abusive practices and requiring public employees to pay a larger share of their pension costs.
When Governor Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion. These deficits, built up over a decade, have now been eliminated by a combination of budget cuts, temporary taxes approved by voters and the recovering economy.
For full text of the bill, visit: http://leginfo.legislature.ca.gov