Leaders reject contribution to pensions

DURHAM >> Gov. Dannel Malloy insists that Connecticut state government alone can no longer handle the burden of paying teachers’ pension costs — costs set to skyrocket over the next 15 years. His plan is to shift those costs onto every city and town — and their property taxpayers. The costs could more than quintuple by the early 2030s.

Connecticut’s mayors and first selectmen unanimously and resoundingly reject any municipal contribution to the Teachers’ Retirement System, including a proposal by the Speaker of the House to phase in the new proposed municipal contribution over five years.

Gov. Malloy’s proposed changes to the teachers’ pension system would require towns to contribute almost $1 billion over the next biennium; that is tantamount to a $1 billion bill to property taxpayers across Connecticut. This cost shift is untenable and will have dire consequences on local budgets.

The estimated annual contribution to the system, according to The Center for Retirement Research at Boston College, would top $1.7 billion by 2032, which would push the governor’s proposed $400 million municipal contribution to almost $600 million. If rates of return do not meet the rosy projections, however, the center says the required contribution could reach over $6 billion by 2032, making the municipal share more than $2 billion annually.

Arguably, the fastest-growing major component of the state, the pension fund — like other state retirement benefit programs — is plagued by more than 70 years of inadequate contribution. The $1.2 billion contribution Connecticut must make this fiscal year — roughly 6 percent of the general fund — will grow a whopping 33 percent over the next two fiscal years

Local leaders additionally emphasize that:

• The teacher pension fund is not sustainable as currently constructed.

• The governor’s proposal did not call for any increase in the teachers’ contribution, currently at 6 percent; while police and firefighters in many communities are assessed at 8 to 9 percent for their pension plans.

• Teacher pension costs can be restrained by switching from a defined benefit program to a defined contribution program, as local governments have already done with a wide range of town hall employee groups; and by switching from a single-tier retirement system to a three-tier one used by municipal employees.

• Towns would be handed a pension system that is not stable, with significant unfunded liability, and one whose funds have been raided in the past to solve state budget problems.

• “Towns have not had a say in any aspect of the maintenance and underfunding of the fund,” noted John Elsesser, town manager of Coventry. “Towns didn’t break the fund, so they shouldn’t fix it.”

While municipal leaders recognize Connecticut needs to make tough decisions to get its fiscal house in order, this proposal will have a devastating impact on towns and cities and will lead to a huge property tax hike on our residents and businesses. We need structural change at the state level, not a transfer of financial obligations.

Mayors and first selectmen are dumbfounded by the thought of having to pay onethird of the cost of our teachers’ retirement payment. Towns are being asked to foot the bill for decades of neglect by the state, which has historically underfunded the Teachers’ Retirement Fund. This is completely unacceptable. Further, the proposal does not advocate for binding arbitration or other mandate reform that would hold down costs.

The Connecticut State Teachers’ Retirement System is responsible for maintaining retirement benefits for over 36,000 retired and 50,000 active teachers, school administrators and their beneficiaries. Municipalities are the most efficient and accountable level of government in Connecticut. However, local governments should not bear the burden of these teacher retirements benefits as they are not negotiated or controlled by local government officials.

This sudden change in policy, compounded by the other reductions and changes in municipal aid, will have a dire impact on local governments. The state must understand that towns and cities cannot sustain their service — delivery responsibilities when costs are shifted or municipal aid is cut, mandates relief is denied, and nonproperty tax revenue options continue to be unavailable. But local cost-cutting alone cannot counteract this costly burden.

We all understand the state’s budget struggle. However, the General Assembly must avoid making this structural change that would merely shift the state’s budget problems onto property taxpayers. It is not hyperbole to suggest that this may be the largest transfer of state responsibility onto municipalities in our state’s history.