The $168 billion California State Teachers’ Retirement System (CalSTRS) faces a $19.6 billion funding gap over the next three decades, despite three years of strong investment returns, according to actuarial consulting firm Milliman. The long-term deficit was projected at $24.2 billion as recently as 2004, but double-digit investment games reduced the expected shortfall. According to the Sacramento Bee, CalSTRS can cover 87% of its pension obligations, up from 82% in 2003. Milliman projected the fund needs a 3.3% boost in annual pension contributions to end the deficit. Currently, school districts pay 8.25% of payroll toward teacher pensions, while the state pays 2% and teachers contribute 8% of their pay.
The fund had a surplus as recently as 1998. But state lawmakers approved $11 billion in sweetened benefits and a smaller state contribution in 2000.