Connecticut Punts on Teacher Pension Payments

Connecticut Governor Dannel P. Malloy wants towns to start paying something for teacher pensions:

Currently the state is responsible for funding, 100 percent, the Connecticut State Teachers’ Retirement System — the fund responsible for maintaining retirement benefits for over 36,000 retired and 50,000 active teachers, school administrators and their beneficiaries.

The governor said the state can no longer afford to have towns not contribute to the retirement fund for teachers.

I get the part about not paying $407 million. In New Jersey we have a long established history of payment by whim.  But if Connecticut politicians also maintain a lapdog judiciary does it extend past the point of simply allowing them to shirk contributions all the way to forcing someone else (albeit the employers of the participants) to make those payments?

Since my last review of the Connecticut Teachers Retirement System the June 30, 2016 actuarial valuation has come out so it seemed like a good day for an update.

Valuations are done every two years with contributions determined two years ahead for two years as follows.

  • FY 6/30/18: $1,290,429,000
  • FY 6/30/19: $1,332,468,000

Total participants @ 6/30/16: 89,027 including:

  • Retirees: 36,065
  • Separated but entitled to benefits: 2,085
  • still working: 50,877

There are also 12,667 separated participants who are not vested though presumably they appear in the valuation either on the off-chance they may return or that they still have employee contributions included in the assets that the plan does not want to let go of.

Asset Value (Market) @ 6/30/16: $15,584,564,000

Actuarial Accrued Liabilities (valued at an 8% interest rate as GASB 67 numbers are not yet out presumably so they could get in these changes before a funded ratio in the low 30s becomes the official one) @ 6/30/16: $29,839,923,000 including:

  • Retirees: $18,228,918,000
  • Separated with vested benefits: $376,252,000
  • Separated with refunds due: $248,034,000
  • Still working: $10,986,719,000

Funded ratio: 52.23%
Unfunded Liabilities as of 6/30/16: $14,255,359,000

FY 2016 activity:

  • State Contributions: $975,578,000
  • Employee Contributions: $290,557,000
  • Payouts: $1,889,067,000

That last number is the big one.  Fifteen years ago annual payouts were $691 million and, absent any meaningful reform on the benefit side, will grow over the next 15 years to $5 billion while all Connecticut politicians are looking for are ways, not to pay those future benefits but, to avoid making even their current mini-contributions.

cttrs

12 responses to this post.

  1. Posted by skip3house on February 5, 2017 at 8:54 pm

    State or towns…same people pay more, probably regressively? Solution may come to actual value of funds added each service year determines pensions, as NJ needs, too.. (Some #s above need ,000 attached…).

    Reply

  2. Posted by Anonymous on February 6, 2017 at 6:32 am

    Better funded than any Fed pension and that’s without the power of the printing press!

    Reply

  3. Posted by George on February 6, 2017 at 8:17 am

    The gov wants a property tax increase instead of an income tax increase? Why not get fed gov to pay for it?

    The pension obligation bond of $2 billion in 08:

    What was missing from the editorial was the fact that the most significant feature of the Connecticut plan is that we created a covenant to bondholders that the state would make the actuarially recommended contribution during the life of the bonds.

    http://www.pionline.com/article/20081222/PRINT/312229990/connecticut-learned-lesson-of-pension-obligation-bonds#

    But the bond was well timed to take advantage of the 07-09 bear market.

    Reply

    • Posted by S Moderation Douglas on February 6, 2017 at 12:03 pm

      From your link:
      “Problems of mandating a universal pension plan”

      “The most sensible approach for a universal pension system is to expand Social Security to replace about 70% of career pay for the average worker. The administrative mechanism already exists; its cost is low to operate, and the program avoids the uncertainties inherent in the financial markets.”

      David Langer
      Consulting actuary
      David Langer Co. Inc.

      Is this even possible?

      If I read the charts correctly, a very low income ($11,282) person retiring at age 65 would receive 70% of career-average earnings. This explains why some in my family can live somewhat comfortably on SS alone.

      Medium earning ($45,000) would receive 38% (that’s me.) Make that 70%, and I would be in decent shape without another pension.

      And max ($108,000) would receive 25%.

      https://www.ssa.gov/oact/NOTES/ran9/an2014-9.pdf

      Reply

      • Posted by S Moderation Douglas on February 6, 2017 at 12:21 pm

        My Dad and stepmother retired on SS alone in their early sixties. (Health problems, couldn’t make it to 65.) Before retirement, they were both just above minimum wage. They scaled back somewhat, no work related travel and expenses, etc., and with a little help from the kids were quite comfortable.

        Until… one shuffled off this mortal coil, as Shakespeare said, “ay, there’s the rub,”

        Two can live (almost) as cheaply as one. When one passes, the SS check disappears, but the rent/mortgage stays the same. I told my wife when she retired she should bank her SS check. Then when I die, she won’t miss that income, and will have a cash reserve to boot.

        No, she didn’t listen.

        Reply

      • Posted by skip3house on February 6, 2017 at 12:34 pm

        From my trivial observations of just public plans, I think actuaries got their jobs by replying…’ How much do you want 2+3 to be?’

        Reply

        • Posted by PS Drone on February 6, 2017 at 8:24 pm

          SS is already broke (present values and all of that) and this genius is recommending the average recipient receive a lifetime benefit of 70% of their average annual earnings? Was his actuarial education received through the LaSalle matchbook school of advanced knowledge?

          Reply

    • Posted by George on February 7, 2017 at 5:36 pm

      Didn’t NJ do a pension bond? Did the bond have any covenants?

      Reply

  4. Posted by State Aid Guy on February 7, 2017 at 9:23 am

    Everyone should be concerned that our next governor will propose something similar.

    Jim Florio wanted to pay the so-called 220 “richest” districts pay for teacher pensions. His plan was actually passed by the legislature in the QEA 1 (Quality Education Act) in a three week legislative blitzkrieg in June 1990. Florio had never even given a hint during his 1989 gubernatorial campaign that he wanted to do anything like this.

    Florio’s plan was only reversed after a ferocious counterreaction by taxpayers, school districts, and the NJEA.

    Now Dannel Malloy, who never said anything about localities paying for pensions when he was reelected in 2014, is proposing the same for CT.

    Having school districts pay for teacher retirement was actually a proposal made by a benefits task force in New Jersey in 2015, although it would be for a hybrid DB/DC system.

    Reply

  5. Posted by Mike on February 8, 2017 at 6:18 pm

    I wonder what the history, high level, is. Apparently most states (plus, famously, Ontario) finance local school board teacher pension benefits. I guess this is one standard way that states pay part of the cost of public schools, with salaries and brick & mortar financed locally.

    For a state to decide that it’s going to rethink this stuff and take on less responsibility feels a bit like a broken promise….sort of the story of public pensions.

    Reply

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