Education Funding

California Teachers’ Pension Benefits Not Excessive, Study Says

By Sean Cavanagh — May 06, 2011 2 min read
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Amid a nationwide debate over public workers’ retirement benefits, a new study concludes that teachers’ pensions in California, the country’s most populous state, are not out of line with those in the private sector.

The report, issued by the California Foundation for Fiscal Responsibility, finds that teachers’ pensions are only modestly larger than those offered by a sample of non-public companies.

Other public employees in California, the authors say, have it better: Many of them receive benefits that are “considerably larger"—often two or three times larger—than those offered in the private sector. The California State Teachers’ Retirement System (CalSTRS), the main system for the state’s teachers, has 852,000 members and beneficiaries—and an unfunded liability of $56 billion.

The same contrast can be seen in public employees’ retirement health benefits. The health benefits for many full-time state workers is large and generous, the report says, but for workers in school districts, the value tends to be “less dramatic.”

The report was completed by Capitol Matrix Consulting for the California Foundation for Fiscal Responsibility, a nonprofit group that describes its role as shedding light on public workers’ benefit systems and “developing fiscally responsible solutions that are fair to employees, employers and taxpayers.” The group has come under criticism from some organizations which have accused it of overstating the state’s pension burdens.

Across the country, governors and lawmakers have taken aim at public workers’ pensions, arguing that they are too generous and that taxpayers can no longer afford them. They’re also the subject of focus in financially strapped California, where Gov. Jerry Brown and Republican lawmakers are debating how much cutting of pensions—as opposed to general funding for K-12 and other programs—is necessary.

Why are California teachers’ retirement benefits less generous than those of other public workers?

The authors cite several factors. Teachers’ pension formulas have comparatively steep payment reduction for educators who retire early. Their health care is often determined by districts, which tend to offer less generous benefits than the state does. And teachers have been required, at least in recent years, to make larger pension contributions than other workers. The authors also note that enrollees in the California teachers’ retirement system neither participate in, nor receive benefits from Social Security.

Overall, California is facing sharp increases in costs across retirement systems in the years ahead, partly because of rising health costs and pension shortfalls, the authors say.

"[A]bsent signficant changes to benefit accruals, public employer obligations for retirement benefits will rise sharply over the next decade,” the study concludes, “further squeezing governmental budgets that are already facing enormous pressures.”

Do you agree with the report’s conclusions, or is the analysis off-base?

A version of this news article first appeared in the State EdWatch blog.