And so it comes as quite a shock to find out that "CalSTRS - California State Teachers' Retirement System is Insolvent."
The time bomb of retiring teachers has gone off. Few admit it yet, but a pension reform group in California understands the problem, and taxpayers are on the hook.As California school districts anticipate possibly the worst budget crisis in a generation, many will try to lighten their burden by enticing older teachers into retirement. But as more and more teachers retire -- with a pension averaging 55 percent to 60 percent of salary -- they will be straining a system that already can't meet its obligations.
The California State Teachers' Retirement System is sliding down a steep slope toward insolvency. The threat isn't to teachers who have retired or plan to, but to the people of California. Taxpayers, who already pick up 23 percent of CalSTRS expenses, will be increasingly burdened as the giant pension system fails to meet its obligations.
"We're on a path of destruction," said Marcia Fritz, president of pension-reform group California Foundation for Fiscal Responsibility... And merely rejiggering formulas for new employees won't rescue the system, she said. Simply put: "We overpromised."
Among those promises, "Californians have typically given their public employees richer retirement benefits" than have other states, according to the nonpartisan Legislative Analyst's Office... Despite the looming disaster, CalSTRS is like an ocean liner that's slow and complicated to change course. Gov. Jerry Brown hasn't mentioned overhauling the system that benefits one of his major supporters, the teachers union. Nor has the Legislature taken up the issue...
...CalSTRS' formula, which is based largely on employee salary, age and longevity, tends to reward retirement at age 61½. For example, a teacher who has worked for 35 years, making $90,000 in her final year, could retire at age 62 and reap a $75,600 annual pension -- 84 percent of salary. Teachers can add to their pensions by "buying" additional years.
CalSTRS is not "headed" for insolvency. It "is" insolvent.
Well, if Trumka and the rest of the union fat-cats are right, all it will take is doubling taxes in California to fix this mess.
Chart: Mercury News.