SACRAMENTO (AP) — The unfunded liability for California's teacher pension fund has risen to $64.5 billion, an amount that is $8.5 billion higher than a year ago but not as bad as forecasts had anticipated, fund officials said Tuesday.
The figure represents the amount of additional funding the California State Teachers Retirement System would need to pay the benefits promised by law to current and retired teachers for the next 30 years.
It adds up to about 13 percent of the annual wages of CalSTRS's 430,000 current school employees. The money would need to be appropriated from the state budget by the Legislature or come from other sources, such as school districts, said Ed Derman, deputy chief executive of the fund.
"We cannot reasonably ever expect to invest our way out of this, so the contributions would have to increase in order to fully fund the system," Derman said.
Tuesday's update comes ahead of a board of directors meeting scheduled for Thursday, during which officials are expected to receive an update on the funding shortfall. The size of the unfunded liability is based on figures as of June 30, the end of the last fiscal year.
While the fund saw improved returns in the past year, the growing unfunded liability is partly a reflection of losses it took at the height of the stock market collapse, including a 25 percent loss in 2009. The previous annual report had estimated the funding shortfall could hit nearly $70 billion.
Partly because it expects continued volatility in the stock market, the CalSTRS board lowered the fund's annual investment forecast earlier this year for the second time in 14 months, to 7.5 percent from 7.75 percent.
Public pension systems have come under scrutiny for what some view as overly generous benefits and unsustainable liabilities for taxpayers. Gov. Jerry Brown, a Democrat, has presented a pension-reform plan that is now before the Democratic-controlled Legislature and has urged lawmakers to address the problems this year.
Derman said fund executives have explained the fund's financial position to lawmakers who are holding hearings to investigate California's pension crisis.
"We made it very clear that this was the biggest issue that CalSTRS is dealing with," he said.
CalSTRS is the state's second largest pension fund, behind the California Public Employees Retirement System, the nation's largest.
The state pays about 2.5 percent of CalSTRS payroll into the fund, about $630 million this fiscal year. School districts pay about 8.25 percent and employees pay 8 percent, Derman said.
Nearly 14,000 school employees retired In the 2010-11 fiscal year, the most recent year for which figures are available, and began collecting their pensions at an average age of 62. Their average benefit is $4,088 a month, or about $49,000 a year. The average benefit for all CalSTRS retirees is $3,417, or $41,000 a year.
CalSTRS members are not eligible for Social Security benefits.
As of June 30, CalSTRS was about 69 percent funded, the report said. Experts typically like to see pension funds with at least 80 percent of the money they need to cover current and future liabilities.
The CalSTRS fund has increased to about $144 billion, the report said, down from its peak of roughly $172 billion in 2007. It serves 430,000 current teachers and other school employees and 222,000 retirees.