Four years ago the state of Connecticut had to borrow $2 billion to balance out the retired teachers’ pension fund,. Now Gov. Dannel P. Malloy’s budget office has called for further injection, after estimating that teacher pension-related spending will jump 40 percent over this fiscal year and next combined, writes Jacqueline Rabe Thomas and Keith M. Phaneuf at the CT Mirror
“Since we lost money in the market, we now have to make up for it by increasing the contributions that we make,” said Gian-Carl Casa, an undersecretary at the Office of Policy and Management.
According to the latest report, the market value of teacher pension fund investments plunged by $2.3 billion over the 2009 and 2010 fiscal years.
The pension funds works by using current teacher and government contributions to pay for the benefits of about 50,000 retirees. When earnings fall, contributions have to rise – this is to save funds to cover benefits earned by teachers during the year, and catching up on savings Connecticut should have deposited in the past, but did not.
So, when the state borrowed the $2 billion to prop the pension fund up, it pledged to its investors to contribute the full annual payment.
The pension fund is the fastest growing state expense, and as the state has no other choice but to keep the pension system afloat. Mary Loftus Levine, leader of the Connecticut Education Association, the state’s largest teachers union, believes this is the right thing to do.
“The state was using the teachers’ pension as an ATM before this. The teachers feel more secure now.”
On top of the $2 billion borrowed, the state paid another $647 million last year to meet contributions and debt payments. The state Office of Policy and Management projected this week that these expenses will rise to $838 million this fiscal year, $909 million next year and reach $1.02 billion by 2016.
While he understands that the plunge in the market has been caused by a national economic crisis, Rep. Vincent Candelora, R-North Branford believes that this increased bill should “send up major red flags”.
“It’s a huge problem. We put in $2 billion to catch up in 2007,” he said.
Candelora claims a 6.5 percent return was promised when the state decided to borrow $2 billion to prop up pensions, and as yet, they’ve seen nothing.