Report: Teacher Retirement Fund

Is Short $5.2 Billion

By Norman Gillespie

Associated Press

HARTFORD — Teachers are renewing a call for the state to fully fund their retirement system, with new figures showing the fund that pays for teacher pensions is underfunded by billions of dollars.

A report delivered this week to the state Teachers’ Retirement Board said the system’s unfunded liability rose from $3.2 billion to $5.2 billion in two years.

For those leading Connecticut classrooms, the news is particularly troubling because about a quarter of the state’s teachers are eligible to retire. The state is also preparing for thousands of retirements in the next decade.

In a letter to Governor M. Jodi Rell, officials from the state’s largest teachers’ union asked that the legislature fully fund the system, after years of contributing less than what the fund needs to provide benefits promised to teachers.

“Should this record of failure continue, it could place in jeopardy the benefits promised to the teachers of this state by the retirement system,” wrote Rosemary Coyle, president of the Connecticut Education Association. “The state cannot continue to jeopardize teacher retirement benefits and shift the cost of paying for them to future generations.”

The state contributed $185 million to the fund during the past two years, about 66 percent of what is necessary, according to a biannual review of the pension fund by actuaries who predict how much money the fund needs. The legislature has not contributed the full amount in 11 of the past 12 years.

“Every time the full contribution for the year is not provided, it increases the contribution for future years,” said Teachers’ Retirement Board administrator Darlene Perez. “Whatever they don’t contribute becomes part of the unfunded liability.”

Poor investment performance, particularly in 2001 and 2002, has complicated the problem, according to state budget and fund officials.

To catch up, the state would have to pour $210 million into the fund next year.

State budget chief Marc Ryan said Connecticut also must increase its contribution to the fund that pays for state employee retirements, which is fully funded, by about $100 million because of stock market losses. Fully contributing to both funds would increase the state’s contribution by roughly $300 million, he said.

The state will make a “major drive” to increase funding for teachers, but it may not reach 100 percent in the coming fiscal year, he said. With a potential budget hole of $1 billion, full funding would likely result in cuts to programs, he said.

“We clearly understand that we need to increase funding rather radically in each fund. But whether we can fund the teacher system at the entire 100 percent is still an open question,” Mr Ryan said.

The state has few other options to increase the fund other than contributions. While officials have discussed issuing pension obligation bonds to help the fund along, the strategy is too risky and has had mixed success in other states, Mr Ryan said. The state’s rainy day fund is also depleted after years of budget struggles.

The longer the state goes without fully contributing to the retirement fund, the bigger the problem becomes, Ms Coyle said.

“The bottom line is, there has to be a willingness to deal with this problem, solve this problem, and get the system back to some fiscal integrity,” she said.