The health care plan that covers 35,000 retired teachers and their spouses will be almost completely depleted two years from now if the governor gets his way.
Gov. Dannel P. Malloy is asking legislators to eliminate the state’s contribution for retired teachers’ health benefits in the upcoming budget, a move that would save the state $70.7 million and help close a yawning deficit.
“I have to put down a budget… I think we have given the right outline of what the budget should look like,” Malloy said in response to a question about the proposed cut.
But the leader of the Teachers’ Retirement Board, the state agency that manages the health plan, reports this cut would put the plan’s funding at a “dangerous level” in two years.
Mark Waxenberg, leader of the state’s largest teachers’ union: ‘The fund is in serious jeopardy.’
And if the state continues to provide no funding after this biennial budget, the health plan would have no money to pay for retired teachers benefits starting in the summer of 2015.
“Well, once the state takes something away, they never give it back,” said Sen. Robert Kane, R-Watertown, and the ranking Republican on the legislature’s budget-writing committee.
While lawmakers years ago created a law that requires the state and active and retired teachers to split the cost to provide health care, the state has a checkered history of paying its share.
In the last four fiscal years, the state contributed nothing in two of those years. In the current fiscal year, the state is set to provide $17.7 million. If the state were to fully funding its share, the contribution would be $36 million.
“The fund is in serious jeopardy… If the cost is just left to teachers, then the plan will collapse,” said Mark Waxenberg, executive director of the Connecticut Education Association, the state’s largest teachers’ union.
Stephen McKeever, vice president of the state’s other teachers’ union, agrees.
“This proposal amounts to a breach of the contract entered into,” said McKeever, of the state chapter of the American Federation of Teachers and who testified before the Appropriations Committee last month. “It’s cruel. Balancing the budget on the backs of retired teachers is just plain wrong.”
As the balance in the fund dipped to $57 million, the Malloy administration called previous administrations irresponsible for short-changing the plan.
“That was an idiotic policy,” Benjamin Barnes, the governor’s budget director, said at the time. “It was a fool’s errand not to fully fund it. I was ashamed when it happened.”
The governor’s proposed budget would result in the fund’s dropping to less than $52 million, far less than what’s needed to cover health costs, reports the Teachers’ Retirement Board.
Teachers’ retirement costs are the second fastest growing state expense
“We get close to having cash-flow issues” now, Darlene Perez, the leader of the board, told legislators last month.
But with the state budget projected to be in deficit in the coming years and the state’s required contributions to the retired teachers’ fund being the second fastest growing state expenditure, lawmakers’ commitment has wavered.
“In this fiscal time, I can’t say one way or another what we’ll do,” Rep. Toni Walker, D-New Haven, co-chairwoman of the Appropriation Committee, said during an interview.
“It is very important, but how do we pay for it? Everybody needs to be asked to give a little more,” she said.
Finding a solution
In the eight years since Carol McCue retired from Hartford Public Schools, she has seen her monthly health-care premium increase from $296 a month to $548.
She doesn’t know what she and the thousands of other retired teachers will do if the state continues to reduce funding. The plan supplements Medicare coverage and is funded by active teachers paying 1.25 percent of their income, retired teachers paying premiums, and the state paying for a portion. The state does not help cover the cost of providing vision, dental or hearing services.
“The state subsidy is a lifeline for those of us who will always face increased yearly premiums. It is also a benefit which was promised to us. Without the state’s help, health care could be out of the reach of many retirees,” McCue told the legislature’s budget-writing committee.
The health fund’s most recent actuarial report found that 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 more than $800 million a year the state pays for the health benefits and pensions for retired teachers is 4 percent of its budget. But the bulk of that funding pays for 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 for the underfunded teachers’ pension account, agreeing at the same time not to reduce the annual required contribution for the next 30 years.
Waxenberg, the leader of the teachers’ union, said a similar move may be needed to shore up the health plan.
“There are ways to solve this,” he said, adding that asking active teachers to pay more than 1.25 percent of their income toward their health benefits when they retire could be one way. “It can be on the table, but not in isolation.”
Follow Jacqueline Rabe Thomas on Twitter @jacquelinerabe
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