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Teacher Layoffs Will Strain Ailing Pension System

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As the budget crisis prompts more layoffs, fewer teachers pay into the retirement system, which is already facing shortfalls

A growing number of school districts will be forced to lay off teachers this year to balance their budgets, placing further strain on California's teachers' retirement system.

That could include teachers in the San Francisco Unified School District, which faces cuts of at least $113 million on top of a deficit of up to $20 million through June 2012. While district officials have said they may consider layoffs as part of next year's budget package, details are still unclear. 

As it is, fewer teachers statewide are paying into the California State Teachers' Retirement System because many school districts have already cut their payrolls over the last several years, a Feb. 10 report from the state Legislative Analysts' office said. Taxpayers are ultimately on the hook for any pension shortfall-- the difference between the pension fund's assets and the amount it owes current and future retirees. 

Pension benefits promised to current and future retirees are considered a "vested right," but Jason Sisney, the finance director of the state Legislative Analysts Office argues that the state should stop funding teachers' pensions and ask teachers and local school districts to contribute more. In addition, the LAO has said the pension fund should stop paying retroactive benefits and establish a pay-as-you go system.

"For the current benefit system to be maintained, either the state or local school districts or employees will have to contribute more," Sisney said in a telephone interview. "Additional funding will have to be identified, or less benefits for future employees will be offered. In all likelihood, it will have to be a combination of both." 

But San Francisco teachers' union officials said teachers should not be asked to contribute more given the recent recession. 

"During a time of economic stress, we should not be asked to make changes to our permanent compensation," said Linda Plack, executive vice president of United Educators of San Francisco, which represents about 6,600 teachers and other employees. "This is an example of a pretext of the financial crisis that the state is in to accomplish something that they do not need to do and should not do."

CalSTRS' investments dropped 25 percent in the recession. The pension fund's unfunded obligation for the 2009 fiscal year was $40.5 billion. The plan's assets will run dry in 2042, according to an actuarial report released last August by CalSTRS. The fund will need an additional $3.8 billion each year to fully fund the system of the next 30 years. 

Teachers pay 8 percent, the school districts contribute 8.25 percent and the state contributes about 2 percent toward teacher pensions.

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