For Immediate Release: 4/20/2017
Contact: Zachary Janowski
Mobile: (860) 384-5777
Unstable teacher pensions hurt Connecticut taxpayers and teachers
Growing pension costs siphon money out of classrooms
April 20 – Crushing debt within the Teachers’ Retirement System is causing grave harm to Connecticut. Those liabilities threaten to take money out of the classroom and funnel it into a failing pension system. This is not the way to serve the people of Connecticut – or the teachers who have long been promised a secure and sustainable retirement.
Gov. Dannel Malloy has recently proposed shifting 1/3 the cost of teacher pensions onto municipalities. This will only hurt Connecticut’s taxpayers, likely result in even higher property taxes – and still not solve the teacher pension crisis.
Yankee Institute’s new study, The Connecticut Teachers’ Pension System: Can it be stabilized?, by Eric Halpern, a financial professional and resident of West Hartford, examines the problems plaguing the Connecticut Teachers’ Retirement System and outlines solutions that would benefit teachers and taxpayers alike.
[Read the study or download a one-pager on teacher pensions.]
Despite borrowing $2 billion to boost the funding of TRS in 2008, the pension system remains underfunded by $13 billion and that figure is projected to grow over time. As Halpern notes in the study, doing nothing will harm Connecticut’s teachers and children, because the state will be forced to direct limited resources to pensions rather than classrooms.
“Pension costs will crowd out other spending, or lead to tax increases,” Halpern writes in the study. “Notably, the financial drain created by the CTRS will reduce the available resources for meeting the educational needs of current students.”
The Connecticut TRS assumes a return rate of 8 percent for the pension fund, far higher than the ten-year return of 4.8 percent. Without changing this unrealistic assumption, the pension system will continue to head toward collapse.
In order to stabilize teacher pensions, Halpern proposes the following reforms:
- Require additional reporting on the system’s risks to improve transparency.
- Increase teacher contribution rates from 6 percent to the national average of 8 percent.
- Eliminate or reduce cost of living adjustments.
- Include new teachers in Social Security.
- Require new teachers to enroll in a defined contribution or hybrid plan to increase portability and reduce taxpayer risk.
Yankee Institute President Carol Platt Liebau said that maintaining the status quo will just funnel more taxpayer money away from schools and into a failing pension fund. “The time has come for lawmakers in our state to make the tough decisions that benefit our children – who are the ones who suffer most when state money funds pensions before funding pressing educational priorities.”
Suzanne Bates, director of policy and legislative outreach for the Yankee Institute, pointed out that Connecticut spends a massive amount of money on education but some teachers are nonetheless left without paper in their classrooms, as the Hartford Courant recently reported.
“We spend a significant amount of money per child in Connecticut, but we still have the largest achievement gap in the country and many of our students are leaving high school unprepared for the future,” Bates said. “If we reform the pension system, we can direct more money to the classroom, while also providing teachers with retirement security.”
In The Connecticut Teachers’ Pension System: Can it be stabilized?, Halpern concludes that continuing with the status quo or transferring the liabilities onto towns will make it more expensive and difficult to live in Connecticut.
“Indeed, such a move is likely to make the state less attractive either to individuals or businesses, ultimately creating greater stresses on the system and the state.”
The Hartford-based Yankee Institute for Public Policy works to transform Connecticut into a place where everyone is free to succeed.