After two-year drought, funds restored for retired teacher health plan

After putting it off for two years, the General Assembly has agreed to fully fund the state’s share of a health plan that covers 33,000 retired teachers and their spouses, easing fears that the plan would run out of money.

The new state budget for the next two years includes $51.5 million to cover the state’s share of subsidized Medicare supplement coverage.

“What that means is the state is finally contributing their share,” said Michael D. Norman, president of the Association of Retired Teachers of Connecticut. “Teachers have been carrying their weight. The state hasn’t been.”

In the previous two fiscal years, when the state also was facing large deficits, lawmakers voted not to help fund the plan. That decision to withhold roughly $60 million in payments into the health plan put it at risk of becoming insolvent, ARTC officials warned last summer.

The health plan, which had a fund balance of about $57 million in March, according to the legislature’s Office of Fiscal Analysis, is facing total projected costs of $154.4 million over the next two years.

“That was an idiotic policy,” Benjamin Barnes, Gov. Dannel P. Malloy’s budget director, said Thursday. “It was a fool’s errand not to fully fund it. I was ashamed when it happened… We decided to fully fund it [this year] because it’s the right thing to do.”

Rep. Andy M. Fleischmann, D-West Harford and co-chairman of the legislature’s Education Committee agrees.

“There’s no question about the strength and robustness of the teachers’ retirement system now,” he said of the decision to fully fund the state’s share.

The state is obligated by law to pay for one-third of the costs of the supplemental coverage and all of the administrative costs, but the legislature waived that obligation in each of its last two annual budgets. The remainder of the program’s costs are paid for by contributions from active teachers and monthly premiums on retirees and their spouses.

The teachers’ plan “is a little Ford barely hanging in there,” Rosalyn Schoonmaker, a retired teacher from Bridgeport and trustee of the state Teachers Retirement Board, said recently. “Teachers can’t afford to pay any more. The retired teachers are almost in poverty already.”

“If they had decided not to make their contributions again then we were getting a point where it would be well beyond our means to keep it afloat,” Norman said, who is a retired teacher from Manchester said.The most recent actuarial report of the health fund found the state has a nearly $3 billion unfunded liability because the state continues to use a pay-as-you-go model to fund the system.

In total, the budget spends almost $800 million a year to pay for the health benefits and pensions for retired teachers. But the bulk of those funds, more than $750 million, is the annual contribution to the statewide teachers’ pension fund — an obligation the state is compelled to meet.

In 2007 state lawmakers voted to borrow about $2 billion to deposit into the under-funded teachers’ pension account, agreeing at the same time not to reduce the annual required contribution for the next 30 years.