Investment returns and contributions comprise the income to the CalSTRS system. CalSTRS cannot set its own contribution rates and requires action by the Legislature and Governor to change them.
The latest CalSTRS valuation, a snapshot of the fund’s health, showed the system’s funding level dipping from 87 percent as of June 30, 2008 to 78 percent as of June 30, 2009. However, investment returns still accounted for the majority of the $8.6 billion of benefits paid out in 2008-09. Solid investment returns, such as those seen at year’s end, are therefore a key component of the CalSTRS funding picture.
I think it’s ridiculous that investment returns are expected to fund such a large portion of these benefits. IMHO, contribution rates have to increase, and the employees should have to pay for the majority of these increases. Also, pension benefits need to be reduced from the current 3% rate for public safety personnel to 2% (teachers are already lower).
IOW, public employees will probably see a drop in total compensation ranging from 15-35% in the coming years. I don’t like it; not because I think they should be paid a lot, but because they **have been promised** this compensation, and many of them have planned their finances based on these promises.
A lot of public employees left higher-paying private sector jobs for the stability and benefits of the public sector. It just seems wrong that when their actions are about to be rewarded (sometimes, after many years of sacrificing higher pay), it’s pulled out from under them.
