HARTFORD, CT — A group of local elected officials said Thursday that it is illegal for Democratic Gov. Dannel P. Malloy to shift about a third of the state’s contributions to the Teacher’s Retirement System to cities and towns.
“We didn’t create this problem,” Ridgefield First Selectman Rudy Marconi said. “… The problem is theirs today, not ours.”
David Grogins, an attorney with Cohen and Wolf, drafted an opinion that says the governor “cannot require municipalities to contribute” because state statute defines the allowable sources of funding.
He said the only allowable sources of funding are contributions from teachers, appropriations from the General Assembly, bond proceeds, and earnings from investments.
“It is clear in its mandate that these are the only funding sources,” Grogins said.
He opined that Malloy’s proposal also violates the 2008 bond covenant the state created to help address the unfunded pension liability. “Statute specifically states that the proceeds of the sale of these bonds must be used to reduce the unfunded liability of the TRS Fund,” Grogins wrote. “The Governor’s proposal circumvents the mechanisms set forth in the Statute to address unfunded liabilities of the TRS Fund.”
But the Malloy administration defended its proposal Thursday.
“We understand that some communities would prefer not to lose this generous hidden subsidy from the state, but it is discouraging that they would hide behind spurious legal arguments rather than directly stating their opposition to paying for their own teachers’ pensions,” Chris McClure, a spokesman for Malloy, said.
He said they believe the proposal doesn’t violate the bond covenant.
“We stand by our assertion that requiring the towns to pay only 1/3rd of the cost for the pensions of their employees is not just the right thing to do for the state, but is not violative of the bond covenant,” McClure said. “The relevant portion of the covenant states ‘there shall be deemed appropriated from the General Fund of the state the amount equal to the annual required contribution to the fund for the Connecticut teachers’ retirement system,’ which is exactly what we have proposed. The covenant is silent as to source of revenue to fund that appropriation.”
Regardless of the legal arguments, local elected officials said Thursday that’s it’s a bad deal for taxpayers because it will drive up property taxes this year and in future budget years.
Coventry Town Manager John Elsesser said Coventry will be asked to contribute $1.3 million in 2018. That’s a 1.45 mill increase for Coventry taxpayers.
“That’s 3.1 percent of our total town budget,” Elsesser said.
In the next 14 years that will grow to 5.4 mills or 11.5 percent of the town’s budget, Elsesser said.
“This shift is huge to the property taxpayers in the state of Connecticut,” Elsesser said.
He said if anyone asked the best way to fund teacher pensions, “would anyone have said let’s put it on the property tax?”
Betsy Gara, executive director of the Council of Small Towns, said they’re hearing from lawmakers who are not in favor of Malloy’s proposal.
“We’re hearing this is a non-starter,” Gara said. “And it’s causing a lot of budget upheaval at the local level.”
She said they’re urging lawmakers to take it off the table. She said taking it off the table makes putting together local budgets more manageable.
Gara said she thinks if they understand the legal implications then they will realize it would be impossible to do in this budget cycle.
“When it’s in the mix it creates too much volatility at the local level,” Gara said.
However, rejecting it means finding another $407 million in spending cuts or new revenue.