A 2014 California law increasing employer and employee contributions to the California State Teachers' Retirement System, West Sacramento, improves the credit outlook of the second-largest U.S. pension fund, Standard & Poor's said.
The ratings company revised its outlook on the $191.2 billion pension fund to positive from stable, according to a statement. It affirmed its issuer credit rating of AA-, fourth-highest, and short-term rating of A-1+, its top score.
“We base the outlook revision on recent legislation that we believe should improve CalSTRS' funded ratio over the next two years, assuming CalSTRS meets its actuarially projected investment returns,” Standard & Poor's credit analyst David Hitchcock said in the statement.
California school districts will pay 70% of the $5.3 billion annual cost of a plan championed by Gov. Jerry Brown last year to narrow the pension fund's $73 billion funding gap, with teachers contributing the balance.
The pension fund had a 68.5% funding ratio as of June 30, according to a CalSTRS news release.