In an effort to reduce California’s long-term fiscal liabilities, Gov. Jerry Brown signed AB 1469 on Tuesday, fully funding the teachers’ retirement system over a period of years through annual contributions of school districts, teachers and state government.
“This bill will ensure a decent retirement for hundreds of thousands of teachers, both now and for decades to come,” said Brown.
According to the Governor’s Office, prior to this bill, the California State Teachers' Retirement System (CalSTRS) was only 67 percent funded and would have run out of money in just over 30 years.
Authored by Assemblymember Rob Bonta (D-Alameda), the legislation will see the first year’s contributions from teachers, schools and the state total approximately $276 million, before growing in subsequent years to more than $5 billion annually.
Gaining Gov. Brown’s approval, the legislation is projected to eliminate the unfunded liability in the system by 2046.
“Our dedicated teachers work tirelessly to prepare our kids for college and career, and they deserve stability in their pension system,” said Senate President pro Tem Darrell Steinberg. “This shared responsibility between the state, teachers and school districts is a necessary step towards assuring the fund’s integrity, and will lift a huge burden from the state’s long term financial responsibility.”
“As Chair of the Committee on Public Employees, Retirement and Social Security, I was proud to engage in a comprehensive effort with both houses of the Legislature and the Governor to address the CalSTRS' $74 billion shortfall,” said Assemblymember Bonta. “AB 1469 puts CalSTRS on a course to fulfill the commitments the State has made to California’s educators for the invaluable service they provide to our students. Enacting this plan would not have been possible without the supportive participation of the leadership of both houses and the progressive vision of Governor Brown.”
Teachers and educators across the state echoed Bonta’s enthusiasm in response to the Governor’s signing of the legislation, as many believe the bill will help California’s educators have more confidence in their retirement plans.
“Recognition of CalSTRS’ financial stability as a priority demonstrates the Governor’s leadership and commitment to a sustainable retirement system for California’s educators,” said Harry Keiley, chair of the Teachers’ Retirement Board. “This historic legislation allows CalSTRS to embrace its future with confidence and optimism knowing that a sound funding plan is firmly in place.”
The bill was included in the 2014-15 state budget, which the Governor signed in San Diego last week. The budget directs $1.6 billion into the state Rainy Day Fund – the first deposit into the fund since 2007 – and reduces the Wall of Debt by more than $10 billion. Under the budget plan, the State’s deficit would be completely eliminated by 2017-18.
When Governor Brown took office, the state faced a massive $26.6 billion budget deficit and estimated annual shortfalls of roughly $20 billion.
According to the Brown Administration, these deficits, which were built up over a decade, have now been eliminated by a combination of budget cuts, temporary taxes approved by voters and the recovering economy.