A new report aimed at influencing Connecticut’s next governor and legislature argues that municipalities should not be forced to pay for the state’s underfunded teachers’ pensions, the annual cost of which could surge five-fold to $6.2 billion by 2032.
The second edition of the Connecticut Conference of Municipalities’ “Election Campaign 2018” series shot back at recent proposals from state lawmakers asking towns and cities to contribute to the state’s teachers’ retirement system (TRS), which currently costs the state about $1.2 billion a year.
Projections indicate the annual cost of the TRS will peak at $6.2 billion in 2032, which is based on an assumed rate of 5.5-percent return, according to a 2015 study by The Center for Retirement Research at Boston College. The cost could be less if investments perform better than that.
TRS is “unsustainable,” CCM says, as proposals shifting retirement costs onto municipalities would not include any structural changes.
“The problem of underfunding goes back decades, and simply passing those costs on to towns and cities is not the solution,” the report says.
Last year, Gov. Dannel P. Malloy proposed charging municipalities about $400 million a year to help pay for some of the state’s costs. Local leaders argued that the move would be illegal.
Complicating matters is a $2 billion bond the state issued in 2008 to help fund TRS. The covenant on the bond ties the state’s hands when it comes to attempts to smooth out annual costs by modifying annual payments.
A state commission last year proposed transferring the assets of the Connecticut Lottery to the TRS to help shrink its unfunded liability, which is among the largest in the country. CCM’s report Monday did not weigh in on the idea.
Education funding, cost grant
CCM says municipalities pay nearly 53 percent percent, or about $6.2 billion, of $11.6 billion in annual public education costs, while the state covers just under 42 percent, with the federal government making up the rest.
Meantime, CCM says towns and cities also pay for 62 percent of the state’s growing $2.1 billion special education services. Those costs account for 24 percent of overall school spending in Connecticut.
Under the report, CCM reviewed the mounting costs of public education, in addition to current and proposed state policies.
To better serve students and taxpayers in Connecticut’s 169 municipalities, the report says the state should increase its education cost sharing (ECS) funding to meet the “real cost” of educating students based on a statutory cost index. ECS funding, totaling $2 billion in 2019, is the state’s largest education grant.
CCM recommended the state take on delivery and funding of special education and also eliminate the minimum budget requirement mandate, which prohibits towns and cities from replacing local education funding when it receives higher ECS funding.
Connecticut, the report says, should also take on 100 percent of the costs to educate severe-needs students and enact “modest” reforms to the teachers’ retirement system.
“State underfunding of local public education over time has shifted a huge unfair tax burden onto the backs of residential and business property taxpayers,” said CCM Executive Director Joe DeLong. “The state must meet its funding obligations to Connecticut’s schoolchildren and school districts even in the face of budget challenges.”
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