Treasurer cites pension concerns

Says shifting payments will cost $20 million more over time

Making teachers pay more toward retirement will end up costing the state in the long run, according to the state treasurer.

In a memo written shortly after Connecticut finally passed a budget this fall that requires teachers to contribute 7 percent — up from 6 percent — toward their pensions as of Jan. 1, state Treasurer Denise Nappier said the change would add about $20 million to the state’s tab in the long run.

“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,” Nappier wrote in a memo about the unfunded liability of the Teachers’ Retirement Fund.

“Nearly a decade ago, I worked with our teachers to establish a disciplined path toward full funding of the Teachers’ Retirement Fund,” Nappier said “This latest action by the Legislature tugs at the threads of our efforts.”

Nappier said the state’s contribution to the teachers’ pension is to be reduced by the same amount as the teachers’ increased payments — about $59.5 million over the two-year budget.

But the teachers’ contributions are also factored into determining the value of their pensions. Therefore, when teachers pay more, they will eventually collect more. According to Cavanaugh MacDonald Consulting, the state’s actuarial consultants, the state will end up owing an additional $20.4 million.

That isn’t much compared to the state’s $2 billion debt, but still a step in the wrong direction, Nappier said, especially since the state vowed in 2008 not to reduce its contribution over the length of the loan.

Teachers, who view the increased contribution as a tax on their profession, agreed with Nappier.

“The memo from the state treasurer highlights the shortcomings of the so-called budget compromise,” Kristen Record, vice president of the Stratford Education Association.

Gov. Dannel P. Malloy, whose plan was to make municipalities share in the cost of teacher pensions, said he agreed with Nappier, too.

“Any increase to Connecticut’s unfunded liabilities should be avoided,” Malloy said.

Malloy said his plan would have made the system more affordable and sustainable over time. The governor wanted municipalities to pay $400 million for local educator pensions. But the budget approved by the Legislature did not pass along those costs to municipalities.

“Connecticut simply cannot afford annual payments of $4 (billion) 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. “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.”

A recent study by TeacherPensions.org found Connecticut taxpayers spend $14,374 per teacher per year toward teacher pension debt.