The latest update on CalSTRS full funding: CalRTA has been working to address the CalSTRS unfunded obligation for the past six years. Because the Governmental Accounting Standards Board (GASB) requirement will be implemented July 1, 2014, if a funding plan isnt adopted, the need for action is more urgent than ever before. Without action by July 1, 2014, Local Education Agency (LEA) balance sheets will have to include the unfunded obligation totaling $110 billion of school employer liability and $50 billion for the State liability. If there is a funding plan adopted by July 1, 2014, the LEA obligation will drop by 50% to roughly $54 billion, and will decline further over time. Similarly, the State balance sheet obligation will drop from about $50 billion to about $20 billion. CalRTA expected any employer increase to start in the 2015-16 year. Governor Browns May Revision, however, proposed implementing increased employer contributions in 2014-15 with a contribution rate increase of 1.25% of member payroll. The percent would then increase until full phase-in after seven years. Both the State and the employee contribution increases also would start in 2014-15. Because the school districts were not prepared for a 1.25% contribution rate increase, the Legislature reduced the proposed employer contribution rate increases during the first two years by 50%. However, to still ensure CalSTRS would be 70% funded by 2024, the remaining contribution rate increases had to be increased significantly in years 4 and 5 if the final employer contribution rate were to remain at 19.1% in year 7. Both the State Senate and Assembly budgets include additional discretionary funding to meet the 2014-15 costs, with the expectation that additional funds also will be provided for 2015-16. While the Legislature and Administration have been responsive to school district concerns, the Administration has made no comment about the Legislatures action to provide discretionary funds for the first year and presumably the second years costs. The Legislature is using the Legislative Analysts higher revenue estimates as the funding source for the discretionary funds as well as all of the other increases above the May Revision being proposed by the Senate and the Assembly. The Governor has been clear he does not agree with the Legislative Analysts revenue estimates. We will provide additional updates as information becomes available.
Posted on: Fri, 30 May 2014 00:08:50 +0000
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