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Other Budget Issues

Last Updated: 4/15/2015
Budget Issue: 2015-16 expected state costs up slightly compared to January estimate.
Program: CalSTRS
Finding or Recommendation: This note discusses updated estimates of the state's 2015-16 required contributions to CalSTRS.
Further Detail

CalSTRS Contributions. The state, teachers, and school and community college districts make contributions to CalSTRS to fund pension benefits for teachers. The state’s contribution to CalSTRS is based on teacher payroll measured on a two-year lag. For 2015-16, the state’s contribution is about 7 percent of 2013-14 teacher payroll. (This figure includes a roughly 2.5 percent contribution for a program that protects the purchasing power of retirees’ benefits from the effects of inflation.)

Contribution Rates Increasing Under Full Funding Plan. The 2014-15 budget included a plan to fully fund CalSTRS’ defined benefit pension program. The plan phases in higher state and teacher contributions through 2016-17, with higher district contributions phasing in through 2020-21. For more detail concerning the CalSTRS funding plan, please see the CalSTRS section (beginning on page 27) of our October 2014 publication, The 2014-15 Budget: California Spending Plan.

State Contribution Up Slightly From Governor’s Budget Estimate. The Governor’s January 2015 budget plan estimated the state’s CalSTRS contribution to be $1.9 billion for 2015-16. In the spring of each year, CalSTRS submits a report to the Legislature establishing the final estimate of teacher payroll on which the state’s contribution is based. The April 2015 report revised 2013-14 teacher payroll upward by around one-third of one percent. This increases the state’s contribution by around $7 million, representing a small erosion to the General Fund budget condition for 2015-16.

(LAO Contact: Ryan Miller.)