Teachers’ Pension Fund Lying Low, Set to Explode

Certain Fullerton school board members have taken issue with our characterization of the CalSTRS teachers’ pension system as being underfunded and unsustainable.  Our resident pension expert suggests that that the board may be reading a few too many rose-colored newsletters emanating from the retirement system itself. Perhaps some illumination is necessary.

This is as clear as it gets.

Before the market crash, CalSTRS was facing a $22.5 billion dollar shortfall. Since then, the market crash has killed about 30% of its assets. At this point, nobody knows how short the fund will be until it is recalculated in the spring. But the results are guaranteed to be frightening.

It’s true that CalPERS is getting all of the attention lately, but that’s only because CalSTRS doesn’t have the same power to levy rate hikes without legislative approval. Rest assured, the teachers’ union has already begun its lobbying effort to boost taxpayer contributions for teachers who retired long ago.

Some estimate that the fund will need to increase contributions by 75% next year. Pension apologists love to claim that “teachers pay for their own retirement”. The truth: payments to the teachers’ pension fund are primarily made by taxpayers, with only about 40% coming from teachers.

Well, maybe sometimes it's too late to be smart.

Further efforts by CalSTRS to distance itself from the problems at CalPERS were hindered again this week as Moodys cut debt ratings for both agencies.

After the bomb goes off next year, the smoke will clear and taxpayers will be reaching into their wallets to clean up another mess. Who is to blame? State legislatures past and present, ignorant school boards across the state, the all-powerful teachers unions and their deceptive actuarials.

For regular updates on the pension crisis and its affect around the nation, visit Fullerton’s very own PensionTsunami.com. School board members should subscribe to email updates, lest they remain uninformed as the tidal wave approaches.

17 Replies to “Teachers’ Pension Fund Lying Low, Set to Explode”

  1. Travis,
    The only FSDS board member concerned with this is me.
    Board members do not vote on the pension enhancements – just the legislators. Unions do lobby for the increases.

  2. Travis,
    I was off a little on my last blog. I wrote that the rest of the FSD board is not concerned but they would be if our district was forced to increase our 8 1/4% contribution to CalSTRS. As you know, the teachers contribute 8% of their salary and as part of a teacher’s total compensation the district contributes 8 1/4%. We do not want to contribute more.

    1. Minard Duncan :Board members do not vote on the pension enhancements

      Um, the school board negotiates salary schedules and approves the budget. Pension contributions are based on the salary schedules. Please don’t try to absolve the school board of culpability here.

  3. Minard, How much does the best teacher in the district make per year? I bet your superintendent makes 3 times more then your best teacher. The problem here seems to be the administration.

    1. In this case the budget is so far out of whack that administrators could cut their salaries to $0 and teachers would still need to take a 5% cut.

  4. “School board members should subscribe to email updates, lest they remain uninformed as the tidal wave approaches”

    High-larious! Knowledge brings with it a certain responsibility. Ignorance means never having to say you’re sorry!

    But let’s look at the caliber of the FSD Board, f’rinstance. Retired educrats and do-gooding housewives. How in the world were these folks ever expected to understand anything about what they regularly vote on?

  5. Duck, the administration is not the problem. There is no doubt that the administration has a couple of positions that I would absolutely eliminate. It is also frustrating that one of their primary roles seems to be the hiring consultants to do their work. However, the administrations salaries are negotiated in the free market. There may be some good ones and some bad ones, but the board is free to terminate anybody they choose within the bounds of finite contracts. The huge problem is with the teachers union and their stranglehold on state and local elected officials. Nearly 90% of the unrestricted budget goes toward salaries and benefits for classified and non-classified staff that could currently be replaced from a pool of thousands of highly qualified, unemployed people who would take their jobs at a fraction of current pay if it were offered….if the board were legally allowed. Until the electorate wakes up and realizes that the skill and performance of teachers exists on a curve like every other job on earth, and that they should be managed accordingly, then we will remain in this quagmire.

    1. Chris,
      You are right on about many of your comments in your Dec. 22 blog. We cut 94 employees for 2009-10 and that includes administrators, teachers and classified employees. One of the problems is that when we cut administrators it causes teachers, office personnel and others to pick up the slack when they are already working very hard. (It appears that you know that administrators do not have tenure.) Teachers are paid for 186 days per year at seven and a half hours per day and almost all, if not all, work many more hours per day than 7 1/2 and several more days than 186. One person that I am very close to is averaging 12 hours per day so far this year- no kidding. She is hoping to cut that to 10 hours per day – at least less than 60 to 65 hours per week. She also comes to work 2 weeks before she is required to and works about two weeks after school ends. I know there are other teachers that do not work this hard but many of them do because of the important job they do. Since we are an elementary district (Kgn. through grade), I am talking about elementary teachers, counselors, psychologists, some classroom teachers,
      asst. principals and principals. I do not know about the high school teachers since they are a grade 9-12 separate district.
      I think I gave you more info, than you needed because you already know much of this. I do agree with many of your comments.

  6. Any ” financially effective” solution to this mess must not only include a reduced pension formula for NEW employees, but also a reduced pension formula for FUTURE years of service for CURRENT employees. (YES, CURRENT employees)

    I think the Marcia Fritz and her group understands this, but feels it so difficult that they are ONLY going for reductions for NEW employees (at least now).

    The trouble is that we’re near broke now, and changing the Plan only for NEW employees saves no real cash for 20-30 years until they begin to retire. We’ll never make it.

    Sure … laws, regs. and case law will make it VERY difficult to reduce pensions for CURRENT employees, but with just about everybody (except the participants riding this gravy train) agreeing that current formula benefits are TOO RICH, why should we CONTINUE along this path, overpaying and accruing additional liabilities near impossible to fund, unjustifiable, and extremely unfair to TAXPAYERS ?

  7. An article titled “Will Pensions Bankrupt Your District?” was just published in the January issue of District Administration magazine, and it provides an excellent overview of the crisis that’s facing school systems not just in California but across the entire nation. Here’s the link: http://www.districtadministration.com/viewarticle.aspx?articleid=2253&p=1#0

    Jack Dean
    President, Fullerton Association of Concerned Taxpayers
    Editor, PensionTsunami.com
    Vice President, California Foundation for Fiscal Responsibility

  8. I didn’t see any mention of this…

    Fairfield, which has built some 64,000 apartments, condominiums and off-campus student-housing units throughout the country, failed amid an inability to refinance debt or sell investment properties.

    A Fairfield spokeswoman confirmed that investors including the Morgan Stanley fund and CalSTRS (California State Teacher’s Retirement System) would be wiped out by the bankruptcy but said they would continue as joint-venture partners on Fairfield projects.

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