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Assembly to tackle pension fund shortfall

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POSTED January 29, 2014 8:59 p.m.

 SACRAMENTO  (AP) — Assembly Speaker John Perez said Wednesday that the Legislature will try this year to find a way to start paying down California's massive unfunded liability for teacher pensions, which makes up the largest portion of the state's deficit and is estimated as high as $80 billion.

"Further delays only mean further costs and further exposures for the state's general fund," said Perez, D-Los Angeles.

The solution should include payments from the state, school districts and individual teachers, he said.

Perez and Assemblyman Rob Bonta, a fellow Democrat from Alameda who is chairman of the Assembly Committee on Public Employees, Retirement and Social Security, announced that the committee would hold hearings starting in February. But they provided few details about a proposal, saying they would be determined according to what the committee hears.

Gov. Jerry Brown did not include any additional funding for the California State Teachers Retirement System liability in his recent budget proposal but said he hoped to start conversations about the problem, which he called "daunting." Brown's budget said that "the state's long-term role as a direct contributor to the plan should be evaluated," and Brown told reporters he doubted a legislative solution was likely this year.

"We're ready to go to work with the Legislature, teachers and school officials to craft an equitable and sustainable solution," said H.D. Palmer, a spokesman for Brown's Department of Finance, in an emailed statement

He said the governor's office expects the legislative hearings "to evaluate all parties' role in funding."

Democrats have repeatedly cited the need to address the pension liabilities, but a solution that has support from teachers unions, school districts and state officials has proved elusive.

The deficit for the nation's largest educator-only pension fund is so large that the fund is projected to deplete all its assets in about 30 years. It would cost teachers, local school districts, community colleges and the state budget a combined $4.5 billion a year to bridge the gap.

Unlike other professions, teachers in California do not pay into Social Security and thus do not receive it when they retire, making their CalSTRS pensions particularly vital.

Less than an hour after Perez held his news conference Wednesday, the powerful California Teachers Association, which represents more than 325,000 teachers and other school employees, announced its endorsement of Perez in his bid for the office of state controller.

Brown's Department of Finance estimates the unfunded liability at $80 billion, while the pension system itself estimates it is $71 billion. Perez and Bonta cited the lower figure Wednesday.

 

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