Connecticut Gov. Dannel Malloy said the general assembly should restructure the contributions into its $17 billion teachers’ pension fund, saying the current contribution rates made by the state are too high.
“Connecticut simply cannot afford annual payments of $4 [billion] to $6 billion into this fund,” said Malloy in a statement. “We must make smart reforms now to fix the system, and we can do it without curtailing benefits for teachers. If we don’t act, there will be no way to meet these obligations without hollowing out major state programs such as Medicaid and municipal aid.”
Malloy’s comments were in response to reports about a memo from Connecticut Treasurer Denise Nappier citing the additional costs associated with recent changes to the Teachers’ Retirement System.
“We need to take action to make our teachers’ retirement system more sustainable and more cost-effective for taxpayers,” said Malloy, “both now and well into the future.”
At a special conference call meeting of the Teachers’ Retirement Board in November, Nappier voted against the approval of a revised actuarial valuation that increases retirement contributions from teachers to 7% of their pay from 6%, and reduces the state’s contribution by $59.5 million.
“This latest action by the legislature tugs at the threads of our efforts,” said Napier in a statement at the time. “And I strongly advise that there be careful scrutiny of any steps that would undermine the framework necessary to reach our goal.”
Malloy said that changes he proposed last session would have made the state’s retirement system more stable, and more able to absorb market changes.
“I will continue to advocate for these commonsense reforms in 2018 and look forward to working with the Treasurer and leaders in the General Assembly to lower all of Connecticut’s unfunded liabilities,” Malloy said.
The proposed amortization and refinancing changes to the Teachers’ Retirement System in Malloy’s fiscal year 2018-2019 budget proposal include extending the amortization period. Malloy said the proposal would help the state avoid actuarially determined employer contribution payments without affecting benefits, and while also still paying off the full amount of the unfunded liability. He said that without any action by the state’s general assembly, “these payments are scheduled to double in the coming years, with the potential of quadrupling or quintupling” within 20 years.