Former Gov. Dannel P. Malloy first raised the idea of sharing the fastest-growing cost in the state budget with cities and towns.
But while Malloy failed to win legislative support before he left office one week ago, the debate over whether to bill communities for a share of municipal teacher pension costs is not over.
Legislative leaders revisited the issue Wednesday at the Connecticut Council of Small Towns’ annual meeting.
And while Republican leaders remain steadfastly opposed to cost-sharing, two Democratic leaders were open to shifting some expenses onto local budgets — albeit at more modest levels than Malloy originally suggested.
“It seems we’ve gotten to the point in state government where we’re always taking more money out of people’s pockets,” House Minority Leader Themis Klarides, R-Derby, told the nearly 250 municipal leaders gathered at the Aqua Turf Club in Southington. “This is one of those danger signs that’s flashing with a red light.”
After more than seven decades of inadequate contributions by legislatures and governors serving between 1939 and 2010, the pension fund for municipal teachers holds enough assets to cover just 58 percent of its long-term liabilities.
The ratio would be considerably worse had the 2007 legislature and then-Gov. M. Jodi Rell not decided to borrow $2 billion to bolster the pension fund’s assets.
Still, because Connecticut must catch up on billions of dollars in missed contributions — as well as the potential investment earnings it forfeited by not saving — the annual contribution to the fund is projected to skyrocket.
The latest actuarial valuation calls for the annual contribution — about $1.1 billion now in a $19 billion General Fund — to approach $3 billion by the early 2030s.
But many argue that number, though imposing, is extremely conservative.
For one thing, it’s contingent on pension investments achieving an average return of 8 percent over the next decade-and-a-half.
A 2015 study by the Center for Retirement Research at Boston College projected that if Connecticut achieves a more realistic 5.5 percent return on pension investments, the annual contribution could exceed $6.2 billion by 2032.
Malloy first proposed in 2017 that communities bear one-third of the cost, starting at about $400 million per year.
Municipal leaders fought back vociferously, arguing the state dramatically boosted teacher pension costs through its fiscal irresponsibility, and therefore should bear the cost of fixing it.
“We didn’t break it, why should we buy it?” Coventry Town Manager John Elsesser, former COST president of the Connecticut Council of Small Towns tweeted when Malloy first proposed cost-sharing.
But Sen. Cathy Osten, D-Sprague, co-chairwoman of the legislature’s Appropriations Committee, said the former governor’s concerns are reasonable.
Pension costs are consuming an ever-increasing portion of state finances, and a more modest cost-sharing plan could be explored.
“We have a huge problem with teachers’ pensions … and we have to deal with this issue going forward,” she said.
Osten, who also is first selectwoman of Sprague, noted that while municipal teachers receive a pension, they do not receive Social Security. Were they eligible, cities and towns would have to contribute toward this benefit.
Though she didn’t offer a specific cost estimate, Osten said the legislature could consider requiring communities to contribute an amount to the teachers’ pension equal to the Social Security contribution — but only for new teachers.
Osten also echoed another concern raised by Malloy, that the current teacher pension system favors wealthy communities over poorer ones.
For an example, Osten cited Greenwich — one of Connecticut’s wealthiest municipalities — and New Britain, which is one of its poorest.
Both have similar populations and school enrollment totals, but Connecticut spent $24 million more last year to cover pension costs for retired Greenwich teachers than for those from New Britain.
“We have a huge problem with teachers’ pensions … and we have to deal with this issue going forward.”
State Sen. Cathy Osten, D-Sprague
In simple terms, Greenwich can afford to pay much higher salaries than New Britain can, yet it gets more help from the state on a per capita basis to provide pensions for its retired teachers.
House Majority Leader Matt Ritter, D-Hartford, also is open to exploring a modest cost-share.
Ritter suggested the legislature build a new limit around the median teacher salary level. Communities that choose to pay teachers above that median level would make a contribution toward the state’s pension costs.
The majority leader also said this only should apply to new teachers hired after the law is passed, and the legislature should not time this requirement to take effect before 2024, so communities could plan for the expense.
“I think that would be fair,” he said. “That’s a five-year lookout.”
But Southbury First Selectman Jeff Manville, a Republican, said Ritter’s suggestion would be unfair unless legislators do more to reform the binding arbitration process that often determines teachers’ pay.
“The binding arbitration [system] puts us in a position where you do have to raise teachers’ salaries,” he said.
Binding arbitration does consider a community’s ability to pay raises, and Manville said towns that have controlled expenses and kept their tax rates low are punished by this process.
Senate Minority Leader Len Fasano, R-North Haven, who also opposed a local cost-share for teacher pension contributions, agreed.
“If you’re a successful town, you get penalized,” Fasano said, warning local leaders not to expect new changes that favor towns in binding arbitration now that Democrats have expanded their majorities in the General Assembly. “There’s a tremendous amount of pushback from certain folks in that building that I don’t think has gone away and, one can argue, has increased.”
Fasano also said he fears that state government, which created the pension crisis, would gradually increase the municipalities’ portion of the pension bill if a cost-sharing arrangement were adopted.
“Pretty soon you’re going to wake up and find you have 50 percent of the responsibility,” Fasano said. “We never promise something and say ‘that’s it.’ We always go back.”
Ridgefield First Selectman Rudy Marconi, a Democrat and president of the Council of Small Towns, said rather than shift pension costs onto towns, the legislature should work more closely with communities to find ways to reduce government costs. “Make us a partner and give us an opportunity to be heard,” he said.
The council represents 110 Connecticut towns with populations of 30,000 or less.
Although cities and towns are adamently opposed to shifting the cost of local teachers pensions to them for very good reasons, I think it makes sense to do this, as long as it is phased in and cities and towns are given authority to raise revenues through a revenue source other than the property tax to pay this cost. Lee Erdmann
The state makes the deal with the teachers unions because the Democrats are owned by them, and now due to mismanagement and this bad deal, the state expects the towns which are better run to bail them out. Maybe they should fix the terms of the deal.
From one side of the legislature’s mouth, “Towns must share in the cost of teachers’ pensions.”
From the other side of their mouth, “We have to reduce the dependence on property taxes.”
Until the legislature sees that you can’t do both, we’ll get nowhere.
If you had more shared resources, you would not have the debt load that towns see. 180ish school districts with 180 supers pulling down 120k plus benefits, there is too much duplication and for some reason no one see this.
If you had more shared resources, you would not have the debt load that towns see. 180ish school districts with 180 supers pulling down 120k plus benefits, there is too much duplication and for some reason no one see this. I am also glad to see that the CT mirror thought police are back in service, i really missed their lack of letting people really share here.
Does anyone really believe the 5 surrounding wealthy towns boasting among the finest schools in the nation around Norwalk where most students do not speak English as a native language and fewer than half ever secure a 4 year college degree would ever consent to “save costs” by consolidating with Norwalk ?
Of course not. High performing school districts want no part of consolidating. So consolidating proposals ultimately involves the lower performing school districts like Norwalk. Potentially saving several hundred millions in administrator salaries. But CT’s public Unions wouldn’t allow that to occur.
So consolidation is a “dead letter” in CT.
Get your facts straight P Berman. I am a former Norwalk resident and ALL students speak English … some happen to be bilingual. Ironically, It’s New Canaan, Darien, Wilton and Westport who rely on Norwalk’s Health Department for travel vaccinations, homeless shelters, and mental health services because those towns are too cheap to fund their own programs.
BOE reports most City student are not native English speakers. That poses a major handicap. For any public school system. Especially for one where most graduates do not secure 4 year college degrees in a world where college is the “new high school”.
This is an example of the governor and the legislature going back on a campaign promise. Will the Mirror show the comparison of campaign promises with what is broken?
Demanding the State finance local teacher pensions is fundamaentally a “beggar thy neighbor” policy and inherently unfair. Why not demand local towns and cities pay the full costs of their highly paid teachers. CT public school teachers are amongst the highest paid in the nation. Performance is another matter. Reportedly less than half of CT’s public school grads ever secure a 4 year college degree.
Of course the Legisaltors over the decades failed to fully fund the CT public school teacher pensions. Demonstrating CT’s part time Legislators fail the public that elected them.
“Reportedly less than half of CT’s public school grads ever secure a 4 year college degree.” Where is that study/report? Please source.
Ah the unintended consequences of eliminating, rather than enhancing, county governments by Public Act 152 in 1959. Serious foresight (and perhaps wisdom) might have seen the benefits of assigning more authority to counties and less to the towns and the CGA. Regionalization would not be so difficult to consider or implement today.
“contingent on pension investments achieving an average return of 8 percent over the next decade-and-a-half”. Good luck with that. Are they investing with Madoff?
“the legislature should work more closely with communities to find ways to reduce government costs”. LOL. The last place to get advice is from democrat spendaholics.
The State made the rules and now, since they have long refused do their jobs, they want to push the result of their incompetence and pandering onto the towns. In effect they are saying ‘it’s not OUR fault.’
Removing pension costs from the budget hasn’t fooled anyone; we still must pay them. In another effort to assuage their base, the CT politicians push through a partial State income tax exemption for the teachers’ pension payments. We’re always told that we can’t re-open contracts yet this is precisely what the State govt has done. The teacher unions bargained no SS deductions but now tell us it’s not fair that they have to pay income tax on their pensions because they don’t get SS.
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