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After decades of not adequately funding the Teachers’ Retirement System, Connecticut is at a crossroads. Do we continue to kick the can down the road or make substantial improvements to how we fund the state’s long-term obligations to teachers? The Association of Retired Teachers of Connecticut is grateful that Gov. Ned Lamont made stable retirement funds for teachers a priority in his budget proposal.

Our retirement benefits are dependent on legislative decisions and past government promises. Connecticut teachers do not contribute to Social Security; however, they do contribute 7 percent of their annual income to the Teachers Retirement Fund and 1.25 percent to their Health Insurance Fund with the belief that these funds will be sustained in their retirement years. In addition, they contribute 1.45 percent for Medicare. Retired teachers who do not have Medicare coverage pay approximately $400 up to $1, 200 per person, per month. For health care, retirees monthly premium costs coupled with monies paid from their HIPA fund result in retired teachers paying the bulk of their own insurance coverage.

Over the years, while teachers contributed to their retirement funds and health care costs, state budgets did not adequately contribute to the Teachers Retirement Fund and to the Health Insurance Fund. As a result, there is an unfunded liability of more than $13 billion in the Retirement Fund and approximately $200 million in default to the Health Fund. Unless these funds are maintained, Connecticut will no longer be able to attract and keep qualified educators to maintain its high standards of education.

Our Health Insurance Fund is in a particularly urgent crisis. The latest projections indicate that, unless the legislature fully funds their statuary one-third share, the fund will become insolvent in 2020. This fund was established by retired teachers to help defray the cost of insurance premiums in their retirement years. To be clear, even with the state’s required contributions to this fund, retired teachers presently pay for most of their own insurance costs.

Gov. Ned Lamont wants to use the state’s projected $380 million budget surplus to smooth out projected payments to the fund and avoid a multi-billion-dollar liability coming up in 2025. The proposal that the governor developed with State Treasurer Shawn Wooden, is projected to save $2.8 billion over the next five years for the system, which has about 37, 260 retirees and 50, 000 active teachers.

Second, he proposes to use about $381 million of January’s estimated $462 million surplus in the fiscal year that runs through June 30, to essentially backstop the retirement program, assuring bond holders of their principle and interest.

Third, Lamont will ask that net revenues from the Connecticut Lottery Corp., projected at $371 million next year and more than half-a-billion dollars by 2032, be available to support what would become the new Teachers’ Retirement Fund Special Capital Reserve Fund.

These three ideas are all sensible ways to put our pension funds on the road to recovery. More will be needed in the future to ensure full sustainability, but we appreciate Governor Lamont’s proposals, especially in the context of competing budgetary priorities.

One area of disappointment in the Governor’s budget is his proposal to permanently cap the income tax exclusion for teacher pensions at 25 percent. Current law will see this exclusion increase to 50 percent to level the playing field for Connecticut retired teachers with many their colleagues from around the country. Many people do not realize that our current teachers contribute a significantly larger portion of their income toward their pension compared to other government employees and are unable to fully participate in the social security system.

While the proposal saves the state just $8 million, it means higher taxes for retired teachers, many of whom regularly consider whether to move to lower tax states. In fact, approximately 9,000 retired teachers have already left Connecticut, bringing their tax dollars with them. A 50 percent income tax exclusion here will be an incentive for many retired teachers to stay in state, paying Connecticut taxes. We respectfully request the legislature to oppose this provision and encourage the Governor to reconsider his proposal.

Ed Messina is the President of the Association of Retired Teachers of Connecticut, which is included among the sponsors of this website.

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