CalSTRS board reviews $447.2 million proposed operating budget; trustees plan second reading in November

The California State Teachers’ Retirement System (CalSTRS) board on Sept. 4 received a first reading of the proposed 2026–27 operating budget, which staff said would total $447.2 million and include 60 new authorized positions.

CalSTRS Chief Financial Officer Julie Underwood and Pritpaul Banes, assistant director of financial planning and budgetary reporting, presented the proposal during the board’s open session. Banes said the total reflects an increase of about $28.2 million, or 6.7% over the prior year, and is composed of $21.7 million for new operating proposals tied to the strategic plan and roughly $6.5 million for routine annual adjustments.

The budget is the board’s first reading and staff recommended trustees approve it after questions; several trustees instead asked for more time and agreed to return the item for a second reading and potential approval in November. “I would ask our colleagues to bring this back, for for approval in November,” Trustee Keeley said.

Why it matters: CalSTRS’ operating budget funds staff, technology, and investment-branch operations that support pension administration and investment management for roughly a million active, inactive and retired members. The board said the request aligns with the system’s multi-year strategic plan and an ongoing emphasis on technology modernization and investment-portfolio capacity.

Key numbers and proposals: Pritpaul Banes told the board the proposed operating budget is “currently projected at 447,200,000.0.” The request includes 1,491 authorized positions (an increase of 60, or about 4.2%). Staff identified two major new proposals: $15.6 million for enterprise-wide strategic support (including $5.6 million for 33 positions and $10.0 million for service contracts) and $6.1 million for 27 positions in the investment branch to support portfolio management, compliance, technology transformation and sustainability work. An additional $6.5 million covers routine annual adjustments, including $4.5 million for employee compensation adjustments and about $2.0 million for the Department of Finance pro rata assessment for shared state administrative costs.

Board questions and staff responses: Trustees pressed staff on oversight and timing. Department of Finance staff encouraged early submission of Budget Change Proposals (BCPs) to allow state reviewers time to assess and ask clarifying questions. Trustee Ruffino asked how the board would measure whether the added resources deliver strategic outcomes; Underwood and Banes pointed trustees to the annual accomplishments report, quarterly key performance indicators and customer-service metrics as accountability tools.

Positions not approved this cycle: Banes said CalSTRS received requests for 116 positions in the 2026–27 cycle and advanced 60 through the review process; the remaining requests will be reevaluated in future cycles.

Technology and outsourcing: The enterprise strategic-support proposal includes $10 million for service contracts to support innovation, cloud modernization, AI integration and ongoing maintenance. Trustees raised concerns about dependency on external vendors and the need to build in-house capacity. Staff said contracts will include training and knowledge-transfer provisions and that CalSTRS is building internal teams alongside consultant support.

Next steps: The board did not take final action on the budget. Trustees and staff agreed to bring an amended budget back at the November board meeting to allow time for additional review and potential edits to BCPs and attachments, and to satisfy the state budget calendar.

Ending: Staff said more detail is available in attachment 2 of agenda item 11 and that they will accept trustee feedback ahead of the November vote.