CalSTRS’ unfunded liability rises 13%; funding ratio falls to 69.4%

CalSTRS' unfunded liability climbed 13% to $64.5 billion in the 12 months ended June 30, reducing its funding ratio to 69.4%, from 71.5%, according to a report from its actuary.

The $152.2 billion California State Teachers' Retirement System, West Sacramento, had an $8.5 billion increase in pension obligations during the 12-month period, according to report by Milliman, the retirement system's actuary.

The report is on the agenda for the retirement system's Thursday board meeting.

The funding shortfall is due primarily to CalSTRS' lackluster investment returns, which averaged 5.5% a year over the last 10 years. This was significantly less than the retirement system's 7.5% rate of return assumption, according to the Milliman report.

CalSTRS' board in February lowered the assumed rate from 7.75%, which added $3.5 billion to the funding gap, the report said.

CalSTRS' assets would be depleted in about 35 years if additional funding is not secured, Millman said.

Neither the state Legislature nor Gov. Jerry Brown has responded to CalSTRS' pleas for more funding over the last year. Both the Legislature and the governor must approve any change to the current funding formula, in which teachers pay 8% of their annual pay; school districts, 8.25%; and the state, around 2%.

CalSTRS spokesman Michael Sicilia said the retirement system would not comment until a news briefing on the report Tuesday morning.