A Bad Proposal Is Always A Bad Idea

A Bad Proposal Is Always A Bad Idea

Shifting pensions to municipalities doesn’t make sense

While this legislative session has been filled with high profile news proposals — school regionalization bills, legalizing recreational marijuana, and the return of tolls to Connecticut roads — the one story that seems to have disappeared is the push to funding of a large swath of Teachers’ Retirement System (TRS) costs onto local governments.

In HB 7150, An Act Implementing The Governor’s Budget Recommendations Concerning Education, there was a proposal that would represent a collosal unfunded state mandate. This proposal requires municipalities to contribute $73 million per year, thereby shifting such payments onto Connecticut property taxpayers.

While this bill no longer contains the language, the idea has become pervasive, and will continue to be considered through the end of the legislative session by Governor Lamont and the General Assembly. Recently, the Appropriations Committee signaled that they intend to seek this shift.

What’s problematic about this proposal is that, while the towns and cities of Connecticut certainly understand the fiscal difficulties facing the state, the state is turning a deaf ear to the difficulties municipalities are already facing and adding to them.

The state wants municipalities to pay into a system that they did not develop or mismanage. Nor does the proposal provide meaningful, comprehensive mandate reform.

This is especially troubling given that municipalities have only one means to raise funds for education, the regressive property tax. Connecticut already has the 3rd highest property tax rate in the country. Add to that the newly enacted State and Local Tax (SALT) cap, which will only amplify the intense negative fiscal impact this proposal will have on local property taxpayers.

The Governor and the state’s legislators must ask themselves if a property tax increase is in the best interest of the state, and to consider what kind of impact this proposal will have on local economies and communities.

SB 873, An Act Stabilizing The Teachers’ Retirement Fund, is certainly a step in the right direction. It would restructure the teachers’ pension system and change the amortization methodology. Dedicating a portion of lottery proceeds to TRS will certainly help stabilize the state’s financial obligation, as well as re-amortizing the schedule of payments.

But these ideas are no spoonful of sugar to make a transfer of 25% of the normal cost to the Teachers’ Retirement System (5% for distressed municipalities) seem palatable. Combine with this the proposal to cut Education Cost Sharing (ECS) over three years giving towns and cities barely any time to adjust to reductions. This move would be a dual blow to many communities who will see cuts in ECS and at the same time they are required to contribute more to TRS.

If municipalities were part of that initial conversation, it might have been better understood what a 25% shift of pension obligations would do to towns and cities, the property tax, and the citizens of Connecticut.

Pension reform should not be enacted in a haphazard way. Piling on a monumental unfunded state mandate is not sound, reasonable or fair to already inundated property taxpayers.