Creative thinking needed on teacher pensions

Finding a way to shore up Connecticut’s Teachers’ Retirement Fund is not a topic for the faint of heart. But the consequences affect everyone in the state, regardless of whether you’re a teacher or not. Decades of underfunding that account — through Democratic and Republican administrations — has left the state obligated to now shuttle over massive amounts of money annually. That puts pressure on what is available for government services, which affect quality of life.

Here’s the stark situation: The annual contribution is now about $1.3 billion, and that will continue to swell unless drastic measures are taken. Gov. Dannel Malloy last winter recommended pushing one-third of the costs — $400 million — to the municipalities. The idea was too drastic, and local leaders howled it would necessitate increasing property taxes. The plan went nowhere.

This week outgoing State Treasurer Denise Nappier proposed another scenario: Dedicate a portion of the Connecticut Lottery Corporation proceeds to the Teachers’ Retirement Fund. Speaking to the state Pension Stability Commission, she said the state could issue lottery-backed revenue bonds of $1.5 billion, and couple that with transferring $1.5 billion of state assets, which could be developed and appreciate in value.

That would put the fund back on “firm fiscal footing, and represents a concrete, tangible plan that would strengthen the long-term sustainability of the TRF while providing relief to the state and avoiding a potential spike,” Nappier said.

The idea is not new, but is worth exploring.

It was recommended in the Connecticut Commission on Fiscal Stability and Economic Growth report to the General Assembly in March, which concluded the Teachers’ Retirement Fund was putting an unsustainable burden on the state’s budget and required a “thoughtful” restructuring. Without any changes, by 2032 the state would be required to contribute $2.7 billion to the fund.

That commission, which had wide-ranging recommendations for getting the state poised for growth, suggested directing the lottery’s net revenues for 30 years to the fund to reduce unfunded liabilities by $7 billion and the annual contribution.

The restructuring part of the equation called for legislation to create a new tier of benefits for new hires and a hybrid plan, including defined contributions, that existing teachers could opt into. Gov.-elect Ned Lamont has publicly supported funneling lottery profits into the teachers’ retirement pot.

We have three points to make.

⏩ Acknowledge that if lottery revenues are designated for the retirement fund, that could mean less goes into the General Fund.

⏩ That said, creative thinking is needed to make up for past mistakes. Significant action is essential to keep the Teachers’ Retirement Fund solvent without sacrificing government services.

⏩ Don’t blame the teachers. They do not receive Social Security benefits; their pension is all they have. Though they are hired by school districts, which sets their salaries, the state pays their pension. It’s not teachers’ fault that past generations of lawmakers have been so bad at math.