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Member, Beacon International Group, Ltd.
WEST SACRAMENTO, Calif.—CalSTRS CEO Jack Ehnes is hoping that California Gov. Jerry Brown will include in his pension reform proposal an increase in the contributions paid by school districts, teachers and the state to eliminate the system's $56 billion unfunded liability and the threat of the system going broke by 2045, a CalSTRS spokesman confirmed.
Mr. Ehnes revealed his thoughts during a meeting of the California State Teachers' Retirement System board on Oct. 6, but it's unclear if CalSTRS lobbyists have been able to secure a commitment from Gov. Brown, who is expected to announce his reform plan as soon as this month.
Mr. Ehnes said a contribution hike as high as 14% might be needed, but said it likely could be phased in over a period of years.
Representatives of Gov. Brown's press office did not return phone calls seeking comment.
A plan to raise contributions would require the approval of the state Legislature. Last January, CalSTRS officials suspended efforts to get an increase in contributions, saying it wasn't politically feasible in a year when the state had a $20 billion budget gap.
Mr. Ehnes said the responsibility for the contribution increase could be divided among school systems, teachers and the state, but did not offer any specifics. School districts now pay the highest share of pension contributions at 8.25% of pay, teachers pay 8%, and the state contributes 2.017%.
Compounding any changes, however, is a California state law that requires teachers to receive some type of benefit offset to compensate for any changes that would reduce their pension package—including contribution increases.
Randy Diamond is a reporter for Pensions & Investments, a sister publication of Business Insurance.