Monday, December 14, 2009

Double Down on Teacher Retirement Losses

The major Sacramento newspaper reports that the State Teachers Retirement System not only lost big bucks in real estate, but is going to throw good money after bad to try to recoup some of the losses:

Ricardo Duran, a spokesman for the pension fund, said CalSTRS has written off $64 million invested in Fairfield Residential LLC, a major apartment developer based in San Diego. Fairfield filed for Chapter 11 bankruptcy reorganization Sunday.

"It's been written off at this point," Duran said. "Current market value: zero."

However, the California State Teachers' Retirement System isn't abandoning the deal. It still plans to invest an additional $6 million to complete its original commitment of $70 million and believes there's a chance to recover at least some of its losses, he said.

When I try that strategy in Reno it usually doesn't work well. Here's to hoping that it works better for CalSTRS.

I guess I don't have to worry, though. The taxpayers are going to pay for my retirement regardless of whether or not CalSTRS makes good investments.


Anonymous said...

And their beer of choice:

I think a single bottle of the above beer has more good business sense than the leadership of CalSTRS, the CTA, and NE (frickin') A combined.

My wishlist:
1. That California would become a right-to-work state (by proposition or otherwise)
2. Public employee pension systems be reformed to model the systems that work in the private sector.
3. The CTA be exposed for the vile parent-loathing, America hating, industry-phobic mafia that it is.

Anonymous said...

There are occasional glimmers of hope, but maybe not with respect to CalSTRS.

CalSTRS publicly admits that they can't invest their way out of funding shortfalls, and that "Closing the gap will require legislative action in the future to increase contributions made by the school districts and the state."

Reading between the lines, I expect them to eventually cut benefits (either outright or indirectly, by not covering erosion of purchasing power caused by inflation, or both), and probably raise the contributions required from individuals and districts.

I'm not a lawyer, but wouldn't it be possible for our wonderful ballot initiative process to be used against CalSTRS/CalPERS if they came to be viewed as parasites? In other words, if they come to the state, hat-in-hand, too often, I think people could easily be goaded into voting against "excessive" public employee pensions. If the constitution can be amended by ballot measure to permit same-sex marriage, why can't it be amended to alleviate the burden of underfunded defined-benefit pensions?

I've been paying into CalSTRS for nearly 15 years now, but I don't know that I've ever really believed they would be providing everything they've promised. I'm not really sure what they've promised, anyway, since my retirement is at least 20 years down the road, and I haven't the vaguest idea what I'll be earning at that point. The benefit calculator that CalSTRS provides calls for one to estimate their salary around the time of retirement; it's basically garbage in, garbage out.

A couple of things are sure:

1) CalSTRS now replaces up to 80% of the purchasing power of pensions, once inflation has eroded the benefit, and 2) most people who retire under CalSTRS get much less than what they were making at their peak earning power. 80% of 75% of your peak earnings works out to be 60% of your peak earnings; while it is better than Social Security, I'll believe it when I see it.