California Gov. Edmund G. "Jerry" Brown Jr. revised his proposed budget for the fiscal year that begins July 1 that includes increasing annual contributions by the state, teachers and school districts to the $183.3 billion California State Teachers' Retirement System, West Sacramento.
Under Mr. Brown's plan for CalSTRS, school districts would see their annual contribution more than double to 19.1% of payroll from 8.25%, phased in over seven years. Teachers would pay 10.25% instead of the current 8%, while the state would boost its contribution to 6.3% from 3%.
The contribution changes would bring an additional $450 million to the pension fund in the coming fiscal year, rising to $5 billion more a year by 2021.
The plan is expected to eliminate the $73.7 billion unfunded liability in about 30 years, according to the budget summary.
“A funding plan that achieves full funding within the proposed time frame is the definitive approach consistently supported by the CalSTRS board,” said Jack Ehnes, CEO of CalSTRS, in a news release. “As this proposal demonstrates, closing the defined benefit program's nearly $74 billion funding gap can be resolved through gradual and predictable contribution increases, and the sooner those increases begin, the less risk to the state. Clearly, state policymakers understand this urgency, and through the leadership of the Legislature and the governor, we are encouraged that a funding plan will be enacted this year.