US - A US court has issued a ruling requiring the State of California to pay the California State Teachers' Retirement System (CalSTRS) US$500m plus interest, regarding a withheld payment for the fiscal year 2003-2004.
A three-member panel from the Third District Court of Appeal in Sacramento unanimously decided the state had violated its contractual obligation to the $169bn pension fund when it withheld its contribution to CalSTRS’ inflation-protection programme, the Supplemental Benefit Maintenance Account (SBMA).
Dana Dillon, chair of the Teachers' Retirement Board said: “The court spoke loud and clear today. The state cannot interfere with promised benefits to teachers. We entered into litigation and also sought to work with the administration for a remedy. Our most vulnerable members, those who are longest retired and most dependent on these benefits, are the true winners in this ruling.”
CalSTRS estimated that the total interest could exceed $200m.
The case originates from 2003, when governor Gray Davis signed Senate Bill 20, which withheld a $500m payment to the SMBA that year.
The SBMA currently funds quarterly payments to approximately 63,000 retired educators and their survivors when inflation erodes their monthly benefit below 80% of its original consumer purchasing power.
The Court of Appeal decision supports a ruling by the Sacramento County Superior Court in May 2005 ordeRING the state to repay CalSTRS. The Department of Finance also filed an appeal in September 2005.
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