CalSTRS Restricted from Loaning Money to the State

You may have heard on the news and in the papers that California Governor Arnold Schwarzenegger has privately proposed borrowing $2 billion from the California Public Employees Retirement System to help bridge the state’s budget deficit. CalSTRS has not been asked to provide a loan.

By law, CalSTRS is not currently obligated or able to provide a loan to the state or any other employer. Specifically, the California Education Code expressly prohibits CalSTRS from providing loans to “employers,” and case law has defined the State of California or any of its agencies as “employers.”