On The Money: CalSTRS $100,000 Club
By Mike Luery
SACRAMENTO (CBS13) -- School districts across California are planning teacher layoffs, while pensions are getting bigger for a growing number of retired school officials. The list of retired teachers and administrators collecting six-figure pensions has grown by 70% in the last year and a half.
There are now more than 5200 people in the club, according to California Foundation for Fiscal Responsibility, a Citrus Heights group warning taxpayers that the CalSTRS pension fund is in deep trouble.
In reviewing the list, CFFR president Marcia Fritz observed, "The top is making $296,555. The second is $290,484."
And those retired school officials will continue collecting those annual pensions until the day they die. Last year, members of the $100,000 club took home a collective $630 million in payouts from the California State Teachers Retirement System, a fund with at least $40 billion in unfunded obligations.
What happens if no changes are made to the CalSTRS fund?
"Then we'll run out of money in 30 years," Marcia Fritz told CBS 13. CalSTRS admits the fund will run out of money in 2042, unless changes occur.
"So the teachers that are starting out today that will put their payments in their entire career will expect to see nothing when they retire," Fritz stated. She added, "The moneys all going to be gone to the people that retired ahead of them."
Classroom teachers are banking on those pensions for their retirement. Many blame the current troubles on the recent tanking of the stock market.
"Yeah we've had to struggle because of the huge Wall Street decline that affected everybody," noted Maggie Ellis, a 5th grade teacher from Elk Grove. "But it's not going to crush government and in fact it can help the economy of the state."
But even with stocks starting to rally, it won't change what analysts say is a fatal flaw.
"The numbers are pretty clear," stated Jason Sisney, the director of finance at the non-partisan Legislative Analyst's Office. Sisney told CBS 13, "CalSTRS has a funding problem. And the state is going to have to figure out how to address it soon."
- Legislative Analyst's Office Report On Pension Funding (PDF Format)
Fixing the problem will not be easy, Sisney said.
"There are only two basic tools available - more money into the system or less benefits for future teachers," Sisney told CBS 13. "Or perhaps a combination of both in order to keep CalSTRS solvent," he added. "While some may hope that investment returns will save the fund – that is a very hard bet to make, when many people feel the system's investment assumptions are already too optimistic."
Teachers we talked to are flustered with that solution.
"We've put into this system 8% every single paycheck," Maggie Ellis said. The 5th grade teacher told CBS 13, "For those people in the $100,000 club, they did it for 30 to 40 years. That's a lot of money going into CalSTRS to help pay for this benefit in the end. And we're not getting a free ride. "
Ellis told CBS 13, "The fund is not in a crisis situation right now and we're not causing the state to go under. It is a benefit to the state, a benefit to the local economies. It's worth keeping," she insisted.
But in the end, taxpayers or teachers must pay more into the system for the fund to stay afloat.
"What happens if we do nothing?" asked Stuart Drown of the Little Hoover Commission.
"The problem gets worse and the problem gets worse quickly," he told CBS 13.
The Little Hoover Commission, an independent, bipartisan government watchdog group, recently released these recommendations on how to fix California's troubled pension plans.
Meanwhile, the CalSTRS $100,000 pension club is growing fast. Legislators have not been able to agree on a pension reform package at the Capitol. Governor Brown has given them a Thursday deadline to strike a deal on the budget.
