CalSTRS staff urged the board to oppose proposals requiring state workers hired after July 1, 2007, to enroll in new defined contribution plans. The proposals, sponsored by Gov. Arnold Schwarzenegger, Assemblyman Keith Richman and the Howard Jarvis Taxpayers Association, "represent a repudiation of CalSTRS' mission to secure the financial future and sustain the trust of California's educators," according to a memo staff sent to the board of the $126 billion California State Teachers' Retirement System, Sacramento.
The memo said the proposals would force CalSTRS to have more liquid investments over time. Staff said DC plans are more costly to administer than defined benefit plans and provide less stable retirement security.
CalSTRS' consulting actuary, Milliman USA, estimated that adopting a mandatory defined contribution plan would increase contributions by $900 million through June 30, 2017. Cumulative cost savings would not occur until the 2028 fiscal year, the memo said.
Staff also recommended opposing Gov. Schwarzenegger's budget proposal that would end state contributions to CalSTRS, shifting the burden to school districts and teachers. The CalSTRS board will consider the recommendations on Feb. 3.
