Share state teacher pension cost? Not so fast, say town lawyers

Towns and cities may not be bound to help the state cover its payments into the Teachers’ Retirement System (TRS) — despite the governor’s fondest fiscal fantasies — according to a law firm that represents municipalities around the state.

“The governor likely cannot require municipalities to contribute to the TRS Fund through the state budgeting process,” attorneys from Cohen and Wolf wrote. “The governor’s proposal not only likely violates state law, but may also violate covenants made by the state in 2008 pursuant to the issuance of Pension Obligation Bonds as well.”

Cohen and Wolf’s research also cites an actuarial valuation of the system done in 2014.

“The study concluded that the accrued liabilities of the fund exceeded the fund’s assets by over $10 billion,” the lawyers say.

Any potential lawsuit challenging the plan would probably be brought under the banner of the Council of Small Towns (COST), according to Ridgefield First Selectman Rudy Marconi, who has championed the idea of fighting back should the legislature act upon the governor’s proposal that towns and cities share a third of the state’s cost for the teachers’ pension fund.

Of course, the legislature hasn’t approved the governor’s plan, so no legal action is necessary.

“Only if it made it through the budget,” Marconi said. “If the legislature agrees and votes to pursue any portion of it, then COST as an organization would in all likelihood take that action, not the town of Ridgefield individually.”

Other towns

Towns that chose might be co-plaintiffs.

“It might be COST, with town of Ridgefield, town Litchfield, town of Goshen,” Marconi said.

The Council of Small Towns represents the interests of the 139 Connecticut towns with populations under 30,000. The state has a total of 169 municipalities.

The state’s obligation for the teachers’ pension is running about $408 million a year.

If towns were made to pay a third of it, Ridgefield’s share is projected to be about $4.4 million a year.

While COST might carry the flag in a legal challenge, the initial research by Cohen and Wolf was done for Ridgefield.

“This was something Cohen and Wolf did for the town of Ridgefield, as requested by the Board of Selectmen, and they agreed it could be shared with COST,” Marconi said.

“It’s part of our retainer. We didn’t pay anything extra,” he added.

Pension fund history

State Sen. Toni Boucher (R-26) looked into the background of the teachers’ pensions and provided research done for the state legislature over a period of years.

“Public school teachers in Connecticut are not covered by Social Security for their public school teaching service,” the office of legislative research reported. “Teachers and school districts make no contributions to the Social Security system for that work and teachers cannot collect benefits based on it. Instead, the state provides teachers with retirement benefits through the state Teachers’ Retirement System (TRS).”

When the Social Security Act was passed in 1935, Congress excluded public employees, mostly because of constitutional concerns about the federal government taxing state governments.

In the early 1950s, Congress passed a law allowing state and local employees to vote to be covered, but members of Connecticut’s Teacher Retirement System voted against it.

The state’s largest teachers union, apparently, wanted to keep it that way.

“In 1959, at the request of the Connecticut Education Association, the state’s General Assembly prohibited TRS members from holding another referendum,” the legislative report says. “The ban on Social Security coverage for Connecticut teachers remains in place.”

‘Controlled by statute’

Benefits teachers receive under their retirement system “are controlled by statute and not subject to collective bargaining,” the legislative research says.

But the legislature can’t go passing new statutes to change benefits for retired and vested teachers — though health benefits are an exception.

“The legislature has enacted two laws that make certain TRS benefits contractual for vested teachers and retirees, thereby prohibiting subsequent General Assemblies from reducing the benefits,” the legislative report says

In addition to the legislative acts, there are court cases firming up the grounds for teachers’ pensions.

The legislature in 2007 passed by wide majorities — 145-to-5 in the House, 34-to-2 in the Senate — a bill authorizing the state to issue bonds to cover some $2 billion in unfunded pension liabilities for the Teachers’ Retirement System.

The problem of not fully financing the pension system, and its future liabilities, is a recurring theme in the state’s unfortunate history of politically managed fiscal decisions.

“The system, as we now know it, was created in the late 1970s when the state put itself on the hook for the employer part of the annual contribution. The employees, the teachers, also contribute,” Boucher said.

“The 1979 act began actuarially based funding of the system and established an amortization plan to pay off the unfunded liability,” she said. “The state never stuck to the plan.”