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Gov. Jerry Brown responds to a question concerning his plan to give more local control over education funding as he discussed his revised 2013-14 state budget plan at the Capitol in Sacramento, Calif., Tuesday, May 14, 2013. (AP Photo/Rich Pedroncelli

While Jerry Brown was in East Los Angeles on Friday pitching his plan for school funding, the nonpartisan Legislative Analyst's Office was releasing a report in Sacramento pointing out that the governor's budget proposal fails to address the state's $73 billion teacher pension shortfall.

The unfunded liability at the California State Teachers' Retirement System is, as the LAO has previously noted, perhaps the state's most difficult fiscal challenge. It is certainly its worst pension problem. Failure to address it now will mean dumping more debt on our children.

CalSTRS is the nation's second largest retirement plan, behind only the system serving state and local government employees. The teacher pension fund now has about 862,000 members, about 2 percent of the state's population.

Thus, ensuring that teacher pensions are adequately funded is not only sound state fiscal policy, it protects large numbers of current and future retirees who need their retirement pay for survival.

Unlike other pension systems, CalSTRS does not control its own financial destiny. When its actuarial calculations show that it needs more money, it must seek permission from state lawmakers to raise rates.

Legislators of course would rather spend money on their pet projects. So they've badly underfunded the teacher pension system slip. CalSTRS now estimates that if nothing is done, it will run out of money by 2047.


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This is a case of pay now or pay much more later. And we're already entering "later." To right the system over the next 30 years would require the state to immediately begin contributing an additional $4.5 billion annually. More delay will only drive up the cost.

Yet, Brown's budget released in January and his update last week contained no plans to address the problem. The silence was stunning. Here's a governor who claims he wants to reform pensions and who brags about retiring state debt, yet he ignores the elephant in the room.

Fortunately, the number-crunchers at the Legislative Analyst's Office have been thinking about this. In reports in March and on Friday, they call for action. Their state revenue forecast is rosier than the governor's, although they acknowledge there are a lot of volatile variables. And, like the governor, they caution against any state spending sprees.

But the LAO is clear that lawmakers should use new revenues to start paying down retirement liabilities, starting with the teacher pension debt. In fact, they say, the CalSTRS debt is more worrisome than some of the loans the governor is proposing to pay off. The reason is that the borrowing costs for the teacher pension debt are higher.

"We believe it is time for the Legislature to establish a plan addressing CalSTRS' unfunded liabilities fully within the next few decades, as we recommended earlier this year. This plan will be expensive, but there is no option to avoid much higher payments" later, the LAO said Friday.

We couldn't agree more.