The Bond Buyer - - Front Page - By Paul Bur­ton

Con­necti­cut out state con­tri­bu­tions law­mak­ers to­ward to push its teach­ers’ pen­sion fund, akin to changes the state made to the state em­ploy­ees’ fund .. . .

Gov. Dannel Malloy wants Con­necti­cut law­mak­ers to push out state con­tri­bu­tions to­ward its teach­ers’ pen­sion fund, akin to changes the state made to the state em­ploy­ees’ fund.

The Gen­eral Assem­bly is sched­uled to re­con­vene Feb. 7.

“Con­necti­cut sim­ply can­not af­ford an­nual pay­ments of $4 to $6 bil­lion into this fund – we must make smart re­forms now to fix the sys­tem, and we can do it without cur­tail­ing ben­e­fits for teach­ers,” Malloy said in a state­ment. “If we don’t act, there will be no way to meet th­ese obli­ga­tions without hol­low­ing out ma­jor state pro­grams such as Med­i­caid and mu­nic­i­pal aid. It’s that sim­ple.”

In a 2014 study that Malloy com­mis­sioned, the Cen­ter for Re­tire­ment Re­search at Bos­ton Col­lege rec­om­mended shift­ing to a level-dol­lar amor­ti­za­tion of un­funded li­a­bil­i­ties of the Teach­ers’ Re­tire­ment Sys­tem.

“TRS faces ris­ing pen­sion costs over the next 18 years if it con­tin­ues with its cur­rent plan to fully fund the sys­tem by 2032,” said the re­port. “The ma­jor­ity of the costs are a re­sult of the rel­a­tively short time pe­riod over which TRS has cho­sen to pay down its large [un­funded ac­tu­ar­ial ac­crued li­a­bil­ity].”

SERS and TRS are the two largest of the six re­tire­ment sys­tems Con­necti­cut ad­min­is­ters.

The state is­sued a $2 bil­lion pen­sion obli­ga­tion bond in 2008 to fund TRS. That bond ma­tures in 2032, pre­cisely the same date that TRS is sched­uled to ex­tin­guish its un­funded li­a­bil­ity.

Malloy pro­posed level-dol­lar amor­ti­za­tion -- which would par­al­lel steps the state took in De­cem­ber 2016 with the State Em­ploy­ees’ Re­tire­ment Sys­tem -in his fis­cal 2018-2019 bud­get pro­posal.

In Novem­ber, two weeks after Con­necti­cut passed its four-months-late bud­get, state Trea­surer Denise Nap­pier said the $41.3 bil­lion spend­ing plan “may erode care­fully con­structed progress to­ward fund­ing suf­fi­ciency” of the Teach­ers’ Re­tire­ment Fund.

That bud­get in­creases re­tire­ment con­tri­bu­tions from teach­ers by 1 per­cent­age point -- from 6% to 7% of their pay.

The shift to teach­ers re­duces the state’s con­tri­bu­tion by $59.5 mil­lion from the amount the state oth­er­wise would have paid into the fund for 2018 and 2019.

“The changes may meet the let­ter of the law re­gard­ing the bond covenant adopted in 2008 to shore up the fund, but they cer­tainly vi­o­late the spirit,” said Nap­pier.

Ac­cord­ing to an anal­y­sis by Ca­vanaugh Macdon­ald Con­sult­ing LLC, the new state bud­get will re­sult in a fur­ther $20.4 mil­lion in­crease in the un­funded ac­tu­ar­ial li­a­bil­ity of the TRF and a de­crease in the funded ra­tio to 55.97% from 56.01%.

Con­cerns over un­funded pen­sion and other post-em­ploy­ment ben­e­fit pack­age li­a­bil­i­ties run na­tional. A re­cent re­port card by the Vol­cker Al­liance graded 19 of the 50 states D or D-mi­nus in the legacy costs cat­e­gory.

Con­necti­cut re­ceived a D in man­ag­ing legacy costs from the al­liance, which said state lead­ers did not fol­low best prac­tices in pub­lic em­ployee OPEB fund­ing.

S&P Global Rat­ings said Con­necti­cut’s above-av­er­age debt, high un­funded pen­sion li­a­bil­i­ties, and large un­funded OPEB li­a­bil­i­ties “cre­ate we be­lieve are sig­nif­i­cant and grow­ing fixed-cost pres­sures that re­strain Con­necti­cut’s bud­getary flex­i­bil­ity.”

S&P and Fitch Rat­ings rate Con­necti­cut’s gen­eral obli­ga­tion bonds A-plus, while Moody’s In­vestors Ser­vice and Kroll Bond Rat­ing Agency rate them A1 and AA-mi­nus, re­spec­tively. ◽

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