CA Teacher Retiree Percentage Dropping

The percentage of teachers retiring in California is falling, but a huge pension fund shortfall for the CALSTRS retirement system still looms on the horizon.

Mike Antonucci from Hot Air reports that the number of retiring California Teachers is down 10% for 2011 — the first time this figure has dropped in five years. The median retirement age has risen from 61.2 to 61.9 over the 10 year period 2001/11. Teachers in California are vested after five years of service and the minimum retirement age is 55.

In 2001, CalSTRS paid teachers under $4 million in benefits. Ten years later, that figure is more than $10.2 million. But the effect on CalSTRS is secondary to the effect these numbers will have on current school district operations. To put it in some perspective, the average working California public school teacher earned $64,069 in 2011. The average payout to a teacher who retired in 2011 was $49,056.

This is not good long term news for the California State Teachers’ Reitrement System, whose deputy chief executive Ed Derman recently told reporters that the fund faces a $64.5 billion shortfall and has only 69% of the money it needs to pay its future obligations.

Better news for the CalSTRS is that the shorter average service period of teachers means that the average 2011 retiree receives approximately $168 per month less in payouts than the average 2010 retiree. However, with another 603,000 teachers coming up to be eligible for the retiree benefits in the coming years a small drop in per teacher payout is not going to solve the fund’s problems.

Pension experts say an asset value equal to about 80% of future obligations is the minimum conservative funding level for a program such as CalSTRS.

To bring its program into balance, CalSTRS would need to boost the total contributions it receives from members, school districts and the state government 13% over the next 30 years, Derman said.

The pension fund, which is still recovering from steep losses during the recession of 2007-09, earned a 23% return on investments for the fiscal year that ended June 30. The fund’s fiscal year-end return averaged 1.2% over the three years ending June 30, 3.8% over five years, 5.7% over 10 years and 8.1% over 20 years.

Derman acknowledges that the fund cannot reasonably expect to invest its way out of problems to full funding so if it is to meet its obligations it will most likely need an increase in the contributions it receives approved by the state Legislature.

Californian legislators are attempting to prop up education funding with increases in sales tax and income tax for top earners, however as it becomes clear to voters that the increases will not directly fund school improvements, teacher salaries or school equipment and will instead be largely swallowed by the retired teachers pension fund shortfalls, it remains to be seen how enthusiastic they are for the plan. Whether shortfalls are ultimately mitigated by taxation increases or pension reform, which is always deeply unpopular with those directly affected, remains to be seen.

Wednesday

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