Malloy Proposes Shifting One Third of Teacher Retirement Costs to Towns
HARTFORD, CT — Gov. Dannel P. Malloy is proposing that municipalities start covering one-third — or $407 million starting in fiscal year 2017-18 — of the teacher retirement costs in the state of Connecticut.
The governor made the announcement at a press conference on Friday at the state Capitol, and said it will be part of his budget address on Wednesday, Feb. 8.
“At a time when state government is making a difficult cut to services we can no longer afford to exclude how we pay for teacher pensions from those conversations,” Malloy said.
“Teachers and school administrators are, after all, municipal employees,” Malloy said. “The state does not pay for pensions for other groups, not police, not firefighters, no other group of town employees does the state establish a pension system for.”
Currently the state is responsible for funding, 100 percent, the Connecticut State Teachers’ Retirement System — the fund responsible for maintaining retirement benefits for over 36,000 retired and 50,000 active teachers, school administrators, and their beneficiaries.
The governor said the state can no longer afford to have towns not contribute to the retirement fund for teachers.
“When we talk about education funding, we typically think of funding our students and schools so that we can deliver on the promise of equitable access to a high quality education,” Malloy added. “But often, the cost of teacher pensions is left out of the education funding conversation.
Malloy added: “This is not a change to the benefits — we must keep our promises to those who have dedicated their lives to educating our children. Rather, we need to change how we pay these benefits in order to create a sustainable, healthy system that keeps our promises to the state’s teachers.”
Malloy said his year, the state, whose budget is $1.5 billion in deficit, is expected to pay $1.2 billion toward teachers’ pensions — representing over one-third of the state’s total educational aid and close to one-quarter of total municipal aid.
The governor’s plan was immediately panned by the executive director of the Connecticut Council of Small Towns (COST).
“Requiring towns to pick up as much as 1/3 of the cost of unfunded teacher pension liabilities will impose a huge burden on local property taxpayers in our small towns,” Betsy Gara, COST’s executive director, said.
“What’s troubling about this proposal is that teacher retirement benefits are set in state statute. As a result, towns have not had the opportunity to negotiate pension benefits but will now be on the hook for funding them,” Gara said. “In addition, towns have had no role in managing teachers’ pensions and will now be required to pay the price for years of unfunded pension liabilities.”
Also critical of the plan was Connecticut Conference of Municipalities Executive Director Joe DeLong.
“The governor’s proposed changes to the Teachers Retirement System that would require towns to contribute almost $1 billion over two years — tantamount to a $1 billion bill to property taxpayers across Connecticut,” DeLong said.
“Such a colossal cost transfer — even given the current fiscal realities and the need to look at all areas of state and local spending — only reinforces the urgency to address the structural changes needed to give municipalities new tools for revenue diversification to keep in line with the overwhelming number of other states,” DeLong said.
The governor tried to put a little silver lining in his teacher retirement initiative by saying he is proposing to preserve the state income tax exemption for the pensions of teachers who continue to live in the state, which was enacted into law in 2014.
Beginning in 2017 and annually thereafter, this exemption is scheduled to be 50 percent. Malloy said his budget package preserves the exemption.
Finally, the governor said his budget proposal will include a $10 million increase of the state’s contribution to the Retired Teachers’ Healthcare Fund in fiscal year 2018 and then an additional $3.7 million increase in fiscal year 2019. Additionally, the budget plan calls for the state’s contribution to the fund to be raised to 25 percent of total healthcare costs from its current funding level of approximately 18 percent.
Malloy said his proposal “isn’t just about saving money.”
He said the current system is determined exclusively by town officials — on how many teachers a town decides to employ and what those teachers are paid. Such a system, Malloy said, clearly benefits the more affluent communities in the state.
“We aren’t failing wealthy people,” Malloy said. “We are failing poor people — black and brown kids.”
Connecticut Education Assocation President Sheila Cohen warned that the plan could have serious consequences for our students, our families, and our communities.
“Cities and towns could cut education budgets, resulting in cuts to classes and other educational programs, teacher layoffs, and larger class sizes for our students,” Cohen said. “This plan would have unintended, long-term consequences on our next generation of students.
“A similar plan was explored more than 20 years ago, and legislators rejected it then,” Cohen continued. “The examination and scrutiny of the plan that was done then must be done now.”
Cohen was happy that Malloy, in her words, “fulfilled his promise to educators by addressing the state’s obligation to the retired teachers’ healthcare fund and by reducing the state income tax on teachers pensions.”
Malloy will present his full state budget proposal on Feb. 8 during an address to a joint convention of the General Assembly.