Monday, January 16, 2017

Proposed Boondoggle

I don't pay into Social Security; rather, I pay into the California State Teachers Retirement System, or CalSTRS.  This pension fund is in such bad shape that the state, the school districts, and the teachers themselves all now have to pay higher amounts into it--in order to fund the retirements we were promised at the lower contributions.  In other words, we're paying more for the same amount.

I guess that's not horrible, from an economics standpoint, if that's what it takes to keep the fund solvent.  After all, as the Instapundit always says, "Something that cannot go on forever, won't."  However, this should tell us that CalSTRS isn't run very well, as we were promised what is not affordable at the lower rates.

Less than a decade ago STRS built a tall, shiny glass building just across the river from Old Sacramento.  I missed the story when it came out, but just saw on the Education Intelligence Agency web site that STRS claims to be running out of room already and wants to build another tower:
CalSTRS is considering building a second office tower, adding to the growing skyline along West Sacramento’s riverfront but raising fresh questions about the financial state of the teachers’ pension fund.

The 10-story building, expected to cost $181 million, would be erected alongside CalSTRS’ 20-story headquarters on the Sacramento River. CalSTRS officials said they need more space; they expect to outgrow the headquarters building, which opened in 2009, about three years from now...

Construction of the tower is not a done deal, however. CalSTRS board members, meeting last month, expressed concerns about spending $181 million when investment returns are weakening and the pension fund is barely two years removed from a financial rescue plan approved by the Legislature. The bailout, designed to erase a long-term funding gap, is costing the state, school districts and teachers billions of dollars a year in additional contributions to CalSTRS. The California State Teachers’ Retirement System controls $193 billion in assets and is about 69 percent funded.

“We’re in a low-return environment probably for quite some time to come, and we’re going to be asking more, frankly, of the state and our employers and our employees,” said state Controller Betty Yee, a board member, during last month’s meeting. “I’d like to wait a couple of years to evaluate our funding status and our staff space needs.”

CalSTRS doesn’t need legislative approval to build the tower and would fund the project itself.
Are teachers the agency's priority, or not?  How much space does managing assets require?


E A said...

Thankfully I was able to, relatively easily, move my CalSTRS monies into my own investment vehicles after 15 years of teaching in CA and moving out of state. I wish you good luck, Darren, and hope that it stays solvent for a few more years.

Darren said...

I didn't know you could do that!

Ellen K said...

Be aware of what happened in Dallas with the Police and Fire Pension Fund. They allowed leadership to set up a program where if you served over a certain number of years, you could cash out. That, paired with some really poor purchases, has taken too much out of the fund and now there's doubt if it remain solvent for the next three years. Aging former first responders are seeing checks reduced which in turn impacts the lifestyle they've achieved.