Here are the newly assigned Proposition numbers. Descriptions and more information are available online.

Proposition 30

Temporary Taxes to Fund Education. Guaranteed Local Public Safety Funding. Initiative Constitutional Amendment.

Proposition 31

State Budget. State and Local Government. Initiative Constitutional Amendment and Statute.

Proposition 32

Prohibits Political Contributions by Payroll Deduction. Prohibitions on Contributions to Candidates. Initiative Statute.

Proposition 33

Changes Law to Allow Auto Insurance Companies to Set Prices Based on a Driver's History of Insurance Coverage. Initiative Statute.

Proposition 34

Death Penalty Repeal. Initiative Statute.

Proposition 35

Human Trafficking. Penalties. Sex Offender Registration. Initiative Statute.

Proposition 36

Three Strikes Law. Sentencing for Repeat Felony Offenders. Initiative Statute.

Proposition 37

Genetically Engineered Foods. Mandatory Labeling. Initiative Statute.

Proposition 38

Tax for Education and Early Childhood Programs. Initiative Statute.

Proposition 39

Tax Treatment for Multistate Businesses. Clean Energy and Energy Efficiency Funding. Initiative Statute.

Proposition 40

Redistricting. State Senate Districts. Referendum.

Today's Lesson ... The Facts About CalSTRS Pensions

During my 31 years as an educator I taught my students using facts – dates and figures that could be substantiated. Facts are what we should focus on now as we discuss pensions. Grandstanding and exaggerations have no place in a discussion about something as important as the financial health of our state and its citizens. And “one size” definitely does not fit all when describing the different systems. CalSTRS is different.

The California State Teachers’ Retirement System (CalSTRS) has been providing retirement security for more than 97 years, even through the Great Depression. Here are some facts about CalSTRS and educators’ retirements:

• CalSTRS earned 8.2 percent over the past 20 years and 12.7 percent last year. The CalSTRS pension fund is not in immediate crisis. It has assets to pay benefits for at least the next 30 years.


• As a percentage of payroll the state is paying less now (roughly 2 percent) than it did 14 years ago when the state paid 4.3 percent of payroll.


• I paid for my CalSTRS retirement with 8 percent of my monthly paycheck. That is higher than private-industry workers pay into Social Security.


• CalSTRS retirement benefits are based on age, years of service and final pay. The formula used is 2 percent of pay, not the higher percentages you often hear about.


• Most CalSTRS retirees don’t receive their own nor their spouse’s earned Social Security benefits (they are penalized for being teachers via the Windfall Elimination Provision and Government Pension Offset).


• Just as private-sector retirees rely on Social Security, teachers rely on their CalSTRS pension to remain self-sufficient.


• Most CalSTRS retirees don’t receive any employer paid health care.


• CalSTRS is already a hybrid retirement plan with a defined benefit formula for one type of compensation and a cash balance plan for other compensation that is similar to a 401(k). The system was created to avoid pension spiking.


• CalSTRS has actually cut retirement benefits in the past year. Most of the CalSTRS benefits that were provided in 2000, at the peak of the dot com boom, were limited term benefits and have sunsetted. Those who earned the benefits prior to the sunset will receive them; however, no new retirees can earn those benefits. 

Opponents of public pensions have lumped all the pension systems together in their attacks, yet CalSTRS is very different in their formulas and benefits. Even the California Foundation for Fiscal Responsibility is quoted as saying, “Teachers have a more modest formula, and it has been fixed for a number of years now.” (North County Times, 1/10/11).

I am a proud member of the California Retired Teachers Association (CalRTA), which sponsored the Elder Full Funding Act that brought CalSTRS to full funding in 1998.  CalRTA has every expectation that Governor Brown will find a funding balance now that is fair to taxpayers and fair to workers, just as we have experienced in the past.

Retirement plan opponents believe that all public retirement systems are the same.  The facts don’t support that argument.  CalSTRS is different.

Polly Bacich
President
California Retired Teachers Association

On February 24, 2011, the Little Hoover Commission released their report on public pensions. Almost none of the report focused on CalSTRS, but the report emphasized that “if the state ignores the situation and does nothing for the next 30 years, CalSTRS will run out of money” doomsday scenario. This is a straw man assumption because the state will start addressing the situation. Governor Brown has promised pension funding adequacy that is fair to taxpayers and workers. The Little Hoover report and numerous newspaper articles act as if they have not heard the Governor’s comments or the Governor does not mean what he has said. So far the Governor appears to mean what he said during his campaign.

In front the Budget Conference Committee that same day, Governor Brown restated his intent to ensure funding as part of his view of pension reform. Because the first priority is to balance the state budget and pension changes will not do that, the Governor has committed to looking at pension funding that is fair to taxpayers and workers after the current budget problem is resolved.  

Some members of the Conference Committee believe that pension cuts need to be part of the budget discussion. On February 25, 2011 the Committee chair agreed to have the Legislative Analyst present pension issues and recommendations to the Committee. Public pensions are not in crisis but there are some politicians who want to use public pensions as a political issue to further their ideology of attacking public employees to cut taxes and cut government services.

CalSTRS Board Chair Jerilyn Harris (a retired teacher) appeared on CNBC October 26, 2010. She fielded tough questions from several different reporters. Other points to keep in mind if you discuss school district contributions is that school districts would be contributing to teachers retirement even if they didn't pay into CalSTRS ... it's called Social Security. It's an either/or situation - doing nothing isn't an option.

Unlike Social Security, which takes in money and just spends it, CalSTRS takes in money and invests it, usually very successfully.  In fact the vast majority of money used to pay benefits (somewhere around 70 percent) comes directly from investment earnings.

The focus on pensions and public employees in California has meant the release of study after study on these topics.  Whether we agree with the findings or not it’s important to be aware of the research because the media covers it. Recently released reports include:

• A study by the Milken Institute on public pensions, which suggests switching to a hybrid plan instead of the current defined benefit plan. The study relies on statistics and assumptions from previous reports with which CalRTA has disagreed. This current report, "Addressing California's Pension Shortfalls: The Role of Demographics in Designing Solutions" is posted online at http://www.milkeninstitute.org  under Publications and Research Reports. CalSTRS Board Chair Jerilyn Harris was a panelist at the Milken Institute's 2010 State of the State Conference on October 19 in Southern California. Harris, a retired science teacher, took part in a panel discussion called Public Pensions: How to Protect Workers and Taxpayers.


• UC Berkeley’s Institute for Research on Labor and Employment also released a study on public employee compensation, “The Truth About Public Employees in California: They are Neither Overpaid nor Overcompensated.” This report can be found online at www.irle.berkeley.edu.

Here's a good op ed from The Press Democrat that explains why we don't need to change how public pensions calculate investment return assumptions ...

Published: Wednesday, July 14, 2010

David Walrath's Social Security Repeal Testimony for June 30 National Commission on Fiscal Responsibility and Reform

Recently some Stanford University graduate students released a study indicating California public pensions were almost $500 billion underfunded.  Unfortunately, the flawed study has received a lot of media attention.  The following is CalRTA's response to the Stanford report:

• Stanford students assume a 4.14% discount factor for future earnings in the public pension funds.  CalSTRS historic annual investment return after 1980 has been better than 8%.  Using 4.14% means more money would be put into CalSTRS than is needed to pay future benefits.


• CalSTRS funding for future benefit payments already is almost 80%. Because states do not go bankrupt as do private businesses, the generally accepted public retirement funding ratio is 80% or greater.  Going to a funding structure that would result in a greater than 100% funding is not fiscally necessary.  Using a 4.14% discount factor for calculating contributions would result in greater than 100% funding if the investment annual average rate of return continues to be 8%.


• Putting more money than needed in CalSTRS means taking more money from classroom funding or increasing taxes.  Current students should not be shortchanged with fewer resources because of unnecessary contributions caused by an artificially low assumed discount rate.


• Putting more money in CalSTRS than necessary for retirement benefits helps Wall Street because CalSTRS will have to make more investments in U.S. and foreign stocks.  It takes money out of classrooms and student programs for Wall Street profits.


• Public school educators will have to pay more than necessary for their retirement.  The extra payments can be considered as a penalty on people who want to be public school educators.


• California’s voters amended the state Constitution to ensure CalSTRS and other public retirement systems are responsible for investment and for ensuring pension funding at the least cost to taxpayers.  The Stanford graduate students report would be contrary to the express will of California’s voters.


• California’s public school classrooms already have been cut by 20% from their 2007-08 funding level.  More than 21,000 teachers received layoff notices in March 2010.  The Stanford report suggests cutting another $60 billion out of classrooms because of the unrealistic discount rate.


• If CalSTRS used a 4.14% discount rate to project funding needs and also achieved its historic 8% rate of investment return, the effect would be to look as if the Teachers’ Retirement Fund would look as if it was unfunded even as investments increased.

CalRTA believes the Stanford report displays a theoretical concept that lacks any real grounding in practical application or the real world.

Post on The Huffington Post
4-15-10
By Ed Derman, Deputy Chief Executive Officer for Plan Design and Communication, CalSTRS

California's public pension systems have come under fire recently by several studies. One of the reports, by students at the Stanford Institute for Economic Policy Research Institute, recommends that public pensions be cut by nearly half their expected rate of return. The state's taxpayers will have to swallow hard if they want to go along with that flawed advice.

Pension funds are critical to retirement security, but they are not immune from the significant investment losses that have hurt all investors. But the Stanford students don't tack away from trouble. They head straight for it -- by calling on public pensions to assume T-bill-like returns for investment portfolios. This approach will run the funds aground at the feet of the state's taxpayers.

Given a choice in 1984, California voters rejected a risk-free investment approach and removed a 25 percent constitutional limit on public pension fund equity exposure when they approved Proposition 21. Leaning on risk-free investments to finance public pensions imposes more costs to the taxpayers.

Pension financing in California will be one of the issues at the top of our next governor's inbox. At the California State Teachers' Retirement System, we think it is important that this important topic be discussed with all the facts.

The primary purpose of a pension is to help employees retire with the ability to maintain their standard of living and independence at the lowest possible cost to employees and employers. We've read a lot about the benefit formulas that could provide 90 percent of pay for those who retire at age 50. Very few public safety employees qualify for this benefit.

The CalSTRS benefits paid to public educators are modest.

The CalSTRS retirement benefits are a shared responsibility with employee contributions, employer contributions and investment earnings doing most of the work.

The average member retires in their 60s with 62 percent of pay after almost three decades of classroom service, without earning any Social Security benefits for that service.
Most California public school teachers retire without employer-sponsored health care.

If a person needs to plan on 80 to 90 percent of pay in retirement to maintain their pre-retirement standard of living, certainly this benefit level assists in achieving that objective.

The benefits paid to public school teachers are guaranteed and, therefore, there is no risk that the benefits will not be paid. CalSTRS prudent long-term investment strategy is based on an asset allocation process that evaluates the system's need for liquid funds to pay current benefits and provides a disciplined investment approach that directs funds that are not immediately needed into longer-term, less liquid and higher earning investments.

Over the long-term, equities provide a higher return than bonds despite the increased level of risk. Historically, more than 60 percent of CalSTRS benefits are paid from investment earnings. It is clear that reducing our investment in equities and increasing our exposure to bonds will increase the cost of the benefits to employers and, ultimately, the taxpayer.

Why would anyone recommend an approach that passes so much of the cost directly to the taxpayer? CalSTRS funded status represents a figure at a point in time that can change with swings in the market. Experience has shown that, over time, Wall Street losses are offset by greater recovery.

For instance, the closing value on March 31, 2010, puts CalSTRS up $18 billion in value from June 30, 2009. That equates to a nearly 18-percent return for the fiscal year. With less than 90 days to go before we cross the fiscal year finish line, the U.S. stock market has regained 60 percent in value in the past 12 months, far outpacing the return for U.S. Treasuries.

Critics of public pensions have suggested that existing defined benefit public pension plans are too expensive. Research by the National Institute on Retirement Security showed that for a given level of benefit, a defined benefit plan is about half as costly as a defined contribution plan because defined benefit plans have better diversification, can pool risk and achieve higher investment returns.

Public pensions systems, such as CalSTRS, take their responsibility to provide retirement benefits in an efficient manner seriously. Part of that is accomplished by taking advantage of the long-term nature of their overall liabilities, and investing appropriately to maximize investment returns with a prudent level of risk, which in the long run will reduce taxpayer costs.

CalSTRS with a $132.6 billion portfolio is the second-largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 848,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college districts.

The following is a Letter to the Editor from Ed Derman, CalSTRS Deputy Chief Executive Officer.  It was printed in several newspapers in response to misinformation.

Clarifying Pension Plan
Saturday, Mar. 27, 2010

The California State Teachers Retirement System Defined Benefit retirement differs from other public pensions, which can sometimes cause confusion for the public and our members.

I offer the following points for clarification on your March 9 editorial: CalSTRS’ well-diversified investment portfolio averaged 8.6% annual returns for the past 30 years, which includes the minus-25% loss from the 2008 global market crash.

The Teachers Retirement Board has the authority to revise its actuarial assumptions — no legislation is required. It began discussions in February and is expected to provide direction in June.

The impact of the benefit enhancements for the state’s educators that were approved in 1998 and 2000 by the Legislature and governor was mischaracterized. The enhancement costs were clearly indicated to the Legislature. Changes to benefits were not incentives to early retirement but earned enhancements to encourage longer teaching careers.

The state’s contribution to CalSTRS decreased, rather than increased as reported, as a percentage of payroll, from 4.3% in 1997 to 2.017% today. We are working with our membership and school districts to reach a long-term funding plan that can be enacted into law. 

Ed Derman
CalSTRS
Sacramento

Recently there have been media stories regarding the CalSTRS fund and the unfunded obligation which categorizes the fund as "poorly structured."

Below is information from CalRTA's legislative advocate David Walrath, an editorial from Dana Dillon, chairman of the Teachers' Retirement Board, and a sample of a recent article.

-------------------------

From David Walrath, CalRTA Legislative Advocate

The California State Teachers' Retirement System has announced that they have a $43 billion unfunded obligation but this does not mean benefits are at risk. The valuation is based on the fund's assets and liabilities on June 30, 2009. While June 2009 was better than March 2009 it was a lot worse than today. The valuation reflects the stock market plunge caused by the greatest recession in the last 50 years.

The fund has more than $130 billon in assets. Even with the stock market decline there are sufficient funds in the Supplemental Benefit Maintenance Account to fund 85% purchasing power protection for the next 75 years. Yes, the unfunded obligation is about 25% of assets (the fund is 77% of full funding), BUT when the Fund was established in 1972 it was less than 50% funded.

We have been here before with a significant unfunded obligation and have dealt with the situation without cutting benefits. We will again deal with the situation and improve the STRS funding to be greater than 77% and again reach toward 100% funding. As in the past, state and employer contribution rates will need to be increased but we hope the increases will be temporary until the Fund is in better shape.

Remember that an unfunded obligation is similar to a mortgage. It has to be paid but it does not have to be paid all at once today. The mortgage is a debt, but as long as you are making payments then you can stay in the house. Also during this time the house's value can increase or decrease but as long as you do not sell then the increase or decrease is just a paper loss not a real loss. This is the same situation for the CalSTRS assets. As long as they are not sold and as long as the stock market rebounds, then the losses are paper losses not real losses. CalSTRS benefits are protected. The assets will improve in value as we recover from the long recession. The recession was an event that we hope is a once in a lifetime event. This does not mean that we will not have to look at contribution rate increases. It does mean that the sky is not falling and no current or retired educator has to worry about receiving their CalSTRS benefits. 

------------------------------------------

By Dana Dillon, Chairman of the Teachers' Retirement Board

Your editorial on the California State Teachers Retirement System fund failed to tell the whole story about its board's discussion on long-term funding of classroom teacher retirement benefits ("Pension folly," Our Views, Feb. 2).

Your assertion that CalSTRS is a "poorly structured" system is wrong. For nearly a century, school employers, teachers and lawmakers have built a world-class financial services organization serving the retirement needs of California's teachers. In that time, even during the Great Depression, we never missed paying our obligations. Our 845,000 members and beneficiaries depend on the pension system to provide a secure retirement benefit.

The average CalSTRS pension replaces 62 percent of a typical member's salary and is the only income she receives at retirement, after a career approaching 30 years of service. Our members do not earn Social Security benefits for CalSTRS service, nor do they generally receive employer-paid health care at retirement.

In contrast to other pension plans, the enhancements to CalSTRS benefits that were enacted by the Legislature and the governor were designed to reward teachers who lengthened their careers, not to provide across-the-board increases. Many of those enhancements passed in the last 10 years will soon sunset on their own. These benefit improvements are not the cause of our existing funding gap; rather the combination of the dot-com bust earlier this decade and the worldwide economic crisis in 2008 has resulted in the need to take action.

The charge that the pension system is "loosely accountable" is untrue. The pension board, made up of public members, teachers and government officials, has been nationally recognized for operating with the highest ethical standards and transparency. Our conversation this week regarding our funding status was conducted in an open public hearing, not behind closed doors. A solution can be reached.

What is needed is to build understanding and support for a solution among all the stakeholders. We must have a plan to pay the unfunded portion of the benefits due our members -- much like homeowners need a plan to pay off their mortgages.

----------------------------------------------

The Los Angeles Times

California teachers pension fund faces shortfall

Alarm bells are ringing at the country’s second-largest public pension fund.

The California State Teachers’ Retirement System, which lost a quarter of the value of its investment portfolio in the spending year that ended June 30, currently faces a $43-billion shortfall in the money it needs to pay future pensions.

What’s worse, warns Chief Executive Jack Ehnes, the $134-billion fund could be broke in 35 years – the length of a typical teaching career – if the state Legislature doesn’t raise the employer contributions paid by school districts in the next few years.

In the meantime, income from CalSTRS investments isn’t likely to fill the funding gap, Ehnes said. The pension fund, which until recently said it needs an average annual return of 8% to keep up with retirees, instead would have to get returns of over 20% a year. Skeptics consider even the 8% figure overly optimistic.

But getting a contribution-hike bill through the Legislature and signed by the governor during the current election year is problematic, Ehnes conceded in a report to be presented to the CalSTRS board on Feb. 5.

The state faces a $20-billion budget deficit and the spending plan proposed by Gov. Arnold Schwarzenegger would reduce spending on kindergarten-through-12th-grade schools by $2.4 billion, which is on top of a cut of $13 billion last fiscal year.

At the same time, California voters could be considering as many as three initiative proposals, aiming for the November ballot, that would reduce pension benefits and delay retirement eligibility for newly hired workers at state and local governments, school districts and some public community colleges and universities.

Marcia Fritz, the chairwoman of the group behind two of the initiatives, Californians for Pension Reform, said she wasn’t sure of Ehnes’ motive for sounding the alarm. Nevertheless, she praised his openness.

“To sugarcoat the numbers and ignore that there is a problem will only cause his situation to grow worse," she said. “I think he’s correct in doing a ‘mayday, mayday, mayday' and trying to shore up the fund.”

Because of CalSTRS’ uncertainties, Ehnes is recommending to his board that the drive for higher employer contributions be put off until 2011. This year should be spent organizing government-employee groups and unions and educating members about the value of their pension benefits, he said.

As of last summer, CalSTRS estimated that it expects to have only 77% of the funds needed to meet all future pension obligations. That ratio could plunge to 13% in 2039 and zero in 2045, Ehnes said. At that point, the pension would revert to an expensive “pay-as-you-go” system, requiring government agencies and ultimately taxpayers to make up the shortfall.

CalSTRS must raise its contributions, from employers, employees or a combination of the two, by 22% to be fully funded three decades from now, Ehnes said.

While it also faces similar financial pressures, the state’s other giant pension fund, the $203-billion California Public Employees' Retirement System, is in somewhat better shape to confront its own funding shortfall, Ehnes noted.

CalPERS’ board can unilaterally raise employer contributions from its member agencies without having to get lawmakers’ approval.

CalPERS reported that it was 86% funded as of June 30, 2008. That percentage could drop to around 65% in 30 years, according to a plan recently approved by the board that “smooths” out severe investment losses from 2008.

-- Marc Lifsher

CalRTA opposes the pension reduction initiatives that have been authorized for circulation.  The initiatives have a circulation deadline of June 14, 2010.  Both initiatives are essentially the same, and they do exactly what their title says:

“Reduces public pensions and retirement health care benefits.” 

CalRTA urges all members not to sign any petition that starts with “Reduces public pension and retirement health care benefits.”

CalRTA will provide more information regarding these attacks on teacher and other public employee pensions.  CalRTA will be conducting regional workshops as well as including information on these pension attacks in CalRTA Contact and the Leadership newsletter.

CalSTRS staff has developed a summary of how the new proposed pension attack initiatives would effect current and future CalSTRS members. Summary

Attorney General summaries:

New Public Employees Benefits Reform Act
i872_initiative_09-0075
i873_initiative_09-0076

Public Employee Pension Limitation Law
i877_initiative_09-0080

Following is information from the CalSTRS Web site – www.calstrs.com.

December 11, 2009

Investor Protection Act of 2009 aims to hold corporate boards more accountable.

WEST SACRAMENTO, CA– The California State Teachers’ Retirement System (CalSTRS) today hailed House approval of the Wall Street Reform and Consumer Protection Act of 2009 as an important step to help avoid a repeat of the nation’s financial crisis.

The House voted 223 to 202 to pass financial regulatory reform legislation contained in HR 4173, which includes provisions championed by CalSTRS aimed at holding corporate boards more accountable.

“We need these regulatory safeguards to shut the door on another financial crisis,” said Anne Sheehan, corporate governance director at CalSTRS.

The measure contains an amendment by California Congresswoman Maxine Waters (D-Los Angeles) which paves the way for shareholders, such as CalSTRS, to nominate corporate directors. The provision was adopted during the House Financial Services Committee debate last month and ensures that the corporate boards are focused on promoting the long-term interests of the business and shareholders.

The California State Teachers' Retirement System, with a portfolio valued at $127.5 billion, is the second largest public pension fund in the United States. It administers retirement, disability and survivor benefits for California's 833,000 public school educators and their families from the state's 1,400 school districts, county offices of education and community college districts and pays benefits of more than $8 billion annually.

Following is information from the CalSTRS Web site – www.calstrs.com.

The CalSTRS investment portfolio is strong and built to withstand any fluctuations in the financial markets.

CalSTRS Investment Strengths

* Diversified assets: U.S. stocks, international stocks, bonds and other fixed income securities, real estate and private equity invested throughout the globe

* Patient, long-term investor who invests based on the long view

* A professional investment staff who use some of the best money managers in the world

CalSTRS a Well-Funded Pension Plan

* Over the last three years CalSTRS achieved an average return of 9.72 percent, which exceeds the 8 percent average annual return needed to meet long-term benefit liabilities.

* At 88 percent, CalSTRS’ long-term funding status puts it among the soundest pension funds in the nation. A 2007 Pew Charitable Trusts report calls 80 percent ‘healthy.’

* CalSTRS pension benefits are safe from these market fluctuations as it is a Defined Benefit Program and the lifetime retirement benefits are guaranteed by law.