Connecticut’s retired teachers are worried that if trends in the latest state budget are any indication, they might be the next group called upon to balance government finances in the near future.
A subpanel of the state Association of Retired Teachers’ met with key legislators in Farmington this week, warning that it believes the state fund that helps cover retiree health insurance costs could fail within the next two years.
If that happens, the next governor and General Assembly, facing massive deficits, will have to find tens of millions of dollars to prop up the fund – or ask retired teachers to pick up thousands of dollars in additional annual health costs.
“The cost of insurance is already breaking the backs of retired teachers,” Sandra P. Bove, co-chairwoman of the association’s legislative committee, said Tuesday. “The fund is not as healthy as it once was, we have more retired teachers who are living longer, and there are fewer active teachers to pay into the fund.
“We are headed for the perfect storm.”
That storm was generated over this fiscal year’s budget, when for the first time the legislature and Gov. M. Jodi Rell suspended the state’s annual contribution to the fund.
The problems tied to that $28.9 million suspended contribution were compounded in the revised $19.01 billion budget adopted last week for the next fiscal year, which suspends the $31.3 million due in 2010-11.
The fund, which had a $60.5 million balance in late February, according to the legislature’s Office of Fiscal Analysis, is projected to be worth about $44 million by June 30, 2011.
And Bove said that if the next governor and legislature – who face projected deficits of $3.37 billion and $3.17 billion in 2011-12 and 2012-13, respectively – suspend contributions for two more years, the association believes at some point before the next fiscal biennium ends, the fund will fail.
State law specifies that if the health fund – which also is backed by investment earnings and contributions from active teachers – becomes insolvent, the legislature must appropriate sufficient dollars to restore it.
But Bove noted that the legislature has a history of repealing statutory guarantees, especially in tough fiscal times.
“I think they should understand why we are nervous,” said Bove, whose group represents about 10,000 of the state’s nearly 18,000 retired teachers. “When the budget has to get passed, they change the laws to make it happen.”
The state’s Teachers’ Retirement Board provides a supplemental health insurance policy for retirees and their spouses who are participating in the federal Medicare program. In most cases, this means they must be age 65 or older.
But for those teachers who took some form of early retirement – which is common in Connecticut, where many teachers do not work the full 37 years of service required for full retirement benefits – the option is different. These teachers must be allowed to purchase the health plan provided to active teachers by the community in which they retired.
For those served by these local plans, the retired teachers’ fund provides a subsidy of $110 per month in most cases, with the remainder of the cost usually covered by the retiree.
Bove said most retirees not yet covered by Medicare and by a supplemental state plan contribute an additional $400 to $700 per month toward their health insurance costs.
And as the 2011 legislature and the next governor begin drafting a new biennial budget next February that tries to close more than $6.5 billion in deficits, might they be tempted to reduce or eliminate the subsidy and add as much as $110 per month to these retirees’ expenses? Sources said the Rell administration proposed scrapping the state’s contribution toward this subsidy permanently in recent negotiations over the revised 2010-11 budget.
Jeffrey Beckham, spokesman for the governor’s budget agency, said only that current data shows the fund is solvent and could absorb the loss of state contributions for two fiscal years.
House Majority Leader Denise W. Merrill, D-Mansfield, who attended the association meeting this week, said she thinks contributions to the fund will be restored. “I think there’s very strong support for the retired teachers in the legislature,” she said. “Everybody has schools in their districts. Everybody knows teachers.”
Merrill, who is foregoing her legislative post to run for secretary of the state this fall, has been one of the legislature’s most vocal advocates for regional and state-municipal initiatives to reduce insurance costs. “We have to get health care costs under control or everybody is going to be paying more in the long run,” she added.
But Rep. John Geragosian, D-New Britain, co-chairman of the Appropriations Committee, said that while he personally supports maintaining state aid for the health insurance subsidy, there are no guarantees when the legislature has to grapple with massive projected deficits next year. “There have been people talking about taking health care away from children,” he said. “I believe we are headed for some very difficult budget times.”