America's second biggest public pension scheme, which provides for the retirement of half a million California-based teachers, will face a shortfall of $64.5bn over the next three decades, its deputy chief executive, Ed Derman, told reporters.

The amount is $8.5bn higher than a year ago but is not as bad as was anticipated by an earlier forecast, the LA Times writes. The previous annual report estimated a shortfall of around $70bn.

The scheme, which saw losses up to 25% in the aftermath of the economic crisis which started in 2007, needs to ensure it increases the total contributions it receives from members, school districts and the state government by 13% over the next 30 years.

As it currently stands the shortfall would need to be contributed to the fund by the state via its budget or come from other sources, such as increased member contributions, said Derman.

At the moment the state pays roughly 2.5% of a CalSTRS' employee annual income into the fund, which amounts to $630m over 2011. School districts pay about 8.25% and the employees themselves pay 8%

"We cannot reasonably ever expect to invest our way out of this, so the contributions would have to increase in order to fully fund the system," Derman said.

While the fund says it saw improved returns during the past year, the losses it took were simply too high to make up for over a short period marked by volatile markets.

Recently the scheme also had to adjust its annual forecast regarding return on investment which is lowered to 7.5% from 7.75%.

CalSTRS provides the retirement benefits for 430,000 current teachers and other school employees, and 222,000 retirees.

First published 12.04.2012

azeevalkink@wilmington.co.uk