CalSTRS investments gain, but pension gap widens

This story is taken from Sacbee /

jortiz@sacbee.com

Published Wednesday, Apr. 11, 2012

CalSTRS' investments earned big profits last year, but the gap between its assets and its obligations to pensioners still widened, according to figures its board will discuss later this week.

Although the California State Teachers' Retirement System earned about 22 percent on its money for the fiscal year that ended June 30, 2011, its unfunded liabilities rose $8.5 billion to $64.5 billion.

Despite the strong returns, CalSTRS Deputy CEO Ed Derman said during a Tuesday conference call that the fund still needs a cash infusion to fulfill pension promises to its members long-term.

"We can't reasonably expect to invest our way out of it," Derman said, estimating the fund would need to rattle off three decades of 10 percent annual returns to climb out of the hole through investments alone.

In the report scheduled for Thursday's CalSTRS board meeting, actuaries said the unfunded share rose from 29 percent at the end of 2009-10 to 31 percent last year in part because of losses carried over from stock market crash.

CalSTRS also lowered its investment return expectations by a quarter-point and allocated money to a supplemental benefits account. Those moves added about $4.5 billion more in unfunded obligations.

Unlike its cousin fund, CalPERS, the teachers' pension system can't impose higher contributions on taxpayers or employers without legislative approval. Without an infusion of cash, the fund will run out of money in 35 years, according to the report.

CalSTRS has been asking the Legislature for a rate increase. Lawmakers are debating Gov. Jerry Brown's 12-point plan to rein in state and local public pension costs, but the proposal doesn't address CalSTRS.

"We've made it very clear that this is the biggest issue CalSTRS is dealing with," Derman said, although he doesn't expect lawmakers to come up with a funding plan until the 2012-13 legislative session.

CalSTRS manages a $152 billion pension fund for 856,000 public school teachers and their families in California's 1,600 school districts, county offices of education and community college districts.