Connecticut’s Pension System Is Nation’s Most Underfunded, Study Finds
Connecticut’s government pension system is the worst in the nation, a new analysis shows.
“Connecticut ranks last with a dismal 19.7 percent funding ratio, down 3.1 percentage points from last year,” reports “Unaccountable and Unaffordable,” a study released by the American Legislative Exchange Council in December 2017. “Connecticut is one of four states to set retiree benefits through collective bargaining and is unique in that the legislature does not have to consent to contracts for them to go into effect. A total of 124 contracts have been passed without a vote in either chamber in the legislature.”
Raised Pension Contributions
Connecticut’s new budget, passed in October 2017, increased teachers’ pension contributions. Since January 2018, teachers have been required to fund 7 percent of their pensions, up from 6 percent.
Suzanne Bates, policy director at the Yankee Institute for Public Policy, says Connecticut’s pension system is in dire condition.
“One of the biggest changes affecting teachers in the budget is a 1 percent increase in payments into the teacher pension system by teachers,” Bates said. “Connecticut’s teacher pension system is woefully underfunded. It has only 56 percent of the necessary assets on hand to cover future liabilities, and the unfunded liabilities are $13.1 billion.”
The 7 percent contribution is well below the national average for teachers not covered by Social Security. In neighboring Massachusetts, for instance, teachers must pay 11 percent of their salary toward their pensions. Even so, teachers in Connecticut are not pleased about the increased contributions, Bates says.
“The teachers union was strongly opposed to asking teachers to increase their payments into the pension system,” Bates said. “Initially, the budget asked for a 2 percent increase, but the union managed to get that reduced to 1 percent.”
Bates says the new budget doesn’t do enough to solve Connecticut’s education spending problems.
“The big debate this year was how much the state should pay for education compared to municipalities,” Bates said. “The state had a broken school funding system, and while there were some changes made to the funding formula, they didn’t go far enough. A positive step was that the formula now follows the child. But the state funds public schools differently. Traditional public schools, for example, are funded through one formula, while charter schools are funded through a separate formula, and they receive less money.”
Unions ‘Put Themselves First’
Teachers’ political power makes reform more difficult, says Vincent Vernuccio, a senior fellow at the Mackinac Center for Public Policy. One Connecticut school district closed five schools early in the 2017–18 academic year after droves of teachers called in sick in unison. A contract stalemate between the school district and the teachers union resulted in the multiple massive “sickouts.”
Teachers unions use their political power to sway government policy in their favor, Vernuccio says.
“It’s clear that teachers unions put themselves first and teachers a distant second, and kids a far, far distant third,” Vernuccio said.
Bates says the unions have powerful political insiders on their side.
“The teachers unions are definitely a force to be reckoned with in Connecticut,” said Bates “They’ve hired many of the top Democratic leaders coming out of the state House and Senate, most recently, former Senate President Don Williams.”
‘A Vicious Cycle’
Vernuccio says teachers unions have a long history of manipulating the system for their own ends.
“Starting in the 1960s, the law changed to allow public employee collective bargaining,” Vernuccio said. “Because of the vicious circle of government unions getting politicians elected, the politicians being able to give more money and power to those government unions and taking that money and power and getting that politician reelected, the unions keep getting stronger and the politicians are reelected.”
Recent reforms of labor laws across the nation, like Connecticut’s recent 1 percent teacher pension contribution increase, are driving a “sea change in the country” which will eventually affect teachers unions, Vernuccio said.
Bates says pension reform will be an ongoing battle.
“Teacher pension reform will continue to be a major issue moving forward,” Bates said. “The current teacher pension system only rewards those teachers who remain in the profession for decades. Teachers who have shorter careers see hardly any benefit at all. It is also a costly and poorly funded system that puts all of the risk on taxpayers.”
Ashley Bateman (email@example.com) writes from Alexandria, Virginia.
“Unaccountable and Unaffordable,” The American Legislative Exchange Council, December 2017: https://www.heartland.org/publications-resources/publications/unaccountable-and-unaffordable?source=policybot