October-November-2021-Advisor

STRENGTHENING

OCTOBER-NOVEMBER 2021 CEA ADVISOR 5

TREASURER WOODEN GIVES TEACHER PENSIONS A BIG BOOST CEA leaders and members help the state keep the promise for teacher retirement

Teachers’ pensions are vital to their security in retirement, which is why State Treasurer Shawn Wooden’s decision to make a huge supplemental contribution—nearly $1 billion—to the Teachers’ Retirement Fund is such great news for educators. This contribution is in addition to the $1.4 billion in regular pension contributions that the state has already appropriated for this fiscal year. Connecticut is able to make this impactful contribution due to a large, unanticipated budget surplus from the last fiscal year and surging financial markets. “This lifts a weight off the minds of teachers,” says CEA Vice President Joslyn DeLancey, who sits on the State Teachers’ Retirement Board. “Whether we’re planning to retire next year or in more than 30 years, this extra contribution goes a long way toward ensuring the state will be able to keep its promise of a secure retirement for Connecticut teachers.” For many teachers, their pensions are their only retirement income, and this contribution helps ensure a secure retirement for every teacher—whether they are veterans or newcomers to the profession. “This is both exciting and reassuring for teachers and our future in retirement,” says CEA President Kate Dias. “Connecticut teachers’ pensions had been underfunded for decades, and thanks to continued advocacy by CEA members, the state is now making a concerted effort to put our pensions on firmer footing.” Though the Teachers’ Retirement Fund (TRF) remains underfunded, each additional contribution by the state above what is actuarially required saves taxpayers money down the road and ensures pension benefits will be there for all teachers, including early career educators, when they retire. “Improving the funding level of the teachers’ retirement system means the state can budget less for teacher pensions in the future,” says CEA Retirement Specialist Robyn Kaplan-Cho. “It’s truly a win-win. The state saves money over the long term, and active and retired teachers can sleep better at night knowing that the fiscal stability of their retirement fund has improved.” The TRF is responsible for paying out pension benefits to teachers after they retire. While they are teaching, educators contribute to the fund out of every paycheck, and the state is also supposed to contribute its share, based on an actuarially determined formula. In recent years, the state has been contributing its share, but for decades—even as teachers always paid their statutorily required contribution—the state paid less than actuaries deemed necessary, resulting in an unfunded liability that will take several decades to pay down. “Teachers’ weekly salaries are 27 percent less than those of other college-educated professionals, and most teachers receive a reduced Social Security benefit for work they have done in addition to teaching,” says Dias. “That’s why it’s so

liabilities and working for sustainable and responsible fiscal policies. During the 2019 legislative session, he authored a plan that the legislature ultimately adopted, at the urging of CEA members, to ensure the long-term solvency of the TRF without placing an additional burden on teachers or taxpayers. His plan stabilized teacher pensions by restructuring the pension debt: reamortizing the unfunded liability of the Teachers’ Retirement Fund over a 30-year period to smooth out payments and lowering the investment earning assumption to a more realistic rate. “Wooden’s actions on behalf of CEA members and their retirement remind us how important it is to elect pro-education, pro-teacher public servants to office,” says Williams. “Treasurer Wooden is always open to discussion with CEA leaders and members, and his actions as treasurer have strengthened teachers’ retirement.” Your advocacy matters Through the 1980s, ’90s, and into the early 2000s, the Connecticut legislature contributed less than it should have to teachers’ pensions. Teachers became fed up that they were contributing to their pensions out of every paycheck while the state shirked its responsibility. Thousands of teachers attended Keep the Promise rallies at the State Capitol and in towns across Connecticut, demanding that the state fulfill its promise to dedicated educators. Finally in 2008, at CEA’s urging, the state issued pension obligation bonds to cover part of the unfunded liability of the Teachers’ Retirement Fund. In 2019, CEA members successfully advocated with lawmakers to adopt Wooden’s plan to restructure the pension debt, which further stabilized teachers’ pensions. Most recently, CEA advocacy ensured that Wooden prioritized the Teachers’ Retirement Fund for this substantial supplemental contribution. “Sometimes we wonder if meeting with state officials, sending a postcard, or attending a rally will really make a difference,” says Dias. “We don’t always get what we want as soon as we ask, but long-term concerted advocacy pays off in a big way. Don’t ever underestimate the power of your voice. Our collective activism to safeguard our retirement is yet another example of how we are stronger together.”

State Treasurer Shawn Wooden, seen here at a 2019 CEA Conference, has made a nearly $1 billion supplemental contribution to the Teachers’ Retirement Fund.

important that our pensions guarantee us a defined benefit when we retire. A guaranteed pension makes it possible for individuals to afford a career in teaching.” CEA Executive Director Donald Williams adds that attacks on teachers’ pensions have been rampant across the state and the country, which is why it’s so notable that Connecticut has chosen another approach. “This significant investment helps protect teachers’ pensions,” he says. “This historic contribution to the Teachers’ Retirement Fund continues my commitment to teachers and your retirement security since I entered office as treasurer,” Wooden said in a statement to CEA. A champion for teachers Both the State Teachers’ Retirement Fund and the State Employees’ Retirement Fund have substantial unfunded liabilities, and Treasurer Wooden could have sent the entire surplus to the state employees’ fund—as some were urging. CEA held numerous discussions with the treasurer urging him to use the surplus to strengthen teachers’ retirement. “We extend a big thank-you to Treasurer Wooden for choosing to deposit the state’s surplus into both pension plans,” says Williams. “Wooden decided to pay down the unfunded liability of both the teacher and state employee retirement funds, making a $903.6 million contribution to teachers’ pensions, and $720 million to state employees’ pensions. He kept his promise to teachers with a responsible and wise fiscal decision.” This $903.6 million represents a substantial boost of approximately UNDERSTAND AND PLAN YOUR RETIREMENT Register for a free workshop at cea.org/retirement- workshops.

4.7 percent of the actuarial value of Teachers’ Retirement Fund assets. Surplus dollars from the previous fiscal year must go toward state pensions due to a volatility cap rule the legislature adopted in 2017. This provision requires the state—after the rainy day fund has reached a legal maximum of 15 percent of the General Fund (currently about $3 billion)—to use any surplus dollars to cover underfunded pension obligations. A provision in state statute requires the treasurer to place any surplus into only one state retirement fund, up to 5 percent of the unfunded liability, with any surplus over and above the 5 percent able to be contributed to another pension fund. Because of this year’s unprecedented surplus, Wooden was able to place 5 percent of the unfunded liability—$903.6 million—into the TRF and the rest of the surplus into the state employees’ fund. “I appreciate the hard work you do every day, inside and outside the classroom,” Wooden says. “We have all been through so much these past 18 months, and we have a long way to go. Education has long been a catalyst for change, and I will always support you in preparing the next generation of leaders to make the world a better place. Part of that support includes doing everything we can to strengthen your pension fund.” Wooden has been state treasurer for three years, and in that time, he has made himself known as a friend to teachers and an advocate for their secure retirement. He is committed to responsibly paying down pension

“Our collective activism to safeguard our retirement is yet another example of how we are stronger together.” CEA President Kate Dias

In 2006, thousands of CEA members stood up for their pensions, attending Keep the Promise rallies at the Capitol and around the state. “Our collective activism to safeguard our retirement is yet another example of how we are stronger together,” says CEA President Kate Dias.