feb-march_advisor

BUDGETING

FEBRUARY–MARCH 2019 CEA ADVISOR 5

GOVERNOR’S BUDGET PLAN ADDRESSES TEACHER PENSIONS, EDUCATION FUNDING Cost shift a sticking point

In his February 20 budget address, Governor Ned Lamont outlined his plans related to a number of public education issues, including teacher pensions, collective bargaining, school funding, and the Retired Teachers’ Health Insurance Fund. The legislature is required to pass a budget for fiscal years 2020 and 2021 by the end of the legislative session in June, and the governor’s budget proposal represents a first step toward that final budget. Teacher pensions “When it comes to balancing the budget, my urgent priority is stabilizing the teachers’ pension fund. It is badly underfunded and doesn’t keep faith with our current teachers, especially the younger ones,” Lamont said. The governor’s budget proposal calls for lowering the estimated rate of return for the Teachers’ Retirement Fund to make it more predictable and accurate. It also calls for reamortizing the unfunded liability over a 30-year period to smooth out payments. To remain fully compliant with pension obligation bond covenants, the governor would appropriate $380.9 million of the current year’s surplus to a newly established reserve fund. If the reserve fund is ever needed to cover the pension bond debt, it would be backed by a requirement that it be replenished via a direct transfer of lottery receipts. “CEA supports sensible ways of assisting the state in its efforts to make up for decades of underfunding teachers’ retirement, including the governor and treasurer’s plan to smooth out the state’s payments to the fund over a longer period of time and lower the investment earning assumption to a more realistic rate,” says CEA President Jeff Leake. “Teachers have consistently paid their fair share into the fund, while the state has not.” CEA opposes cost shift The proposal also calls for shifting the state’s responsibility for teacher retirement onto cities and towns. Most towns would be responsible for 25 percent of the state’s share of normal retirement costs, not unfunded liabilities. Towns with higher average pensionable salaries would contribute more than 25 percent, and struggling municipalities would contribute only five percent of their associated normal cost. “We oppose any teacher retirement cost shift that transfers millions in costs from the state to our cities and towns, putting additional financial strain on taxpayers and pressure on already tight school budgets,” Leake says. Legislators have indicated they want to recruit more teachers of color and incentivize teachers to work in the hardest-to-staff school districts, yet this proposal would penalize districts for paying teachers a fair wage. “As strikes across the country have shown us, teacher salaries are not excessive, and compensation plays a key role in recruitment and retention,” Leake points out. “Teachers earn 19 percent less than similarly skilled and educated professionals, forcing many to take

accelerated, and updated student counts would be used. Overall, the budget proposal designates an additional $17.7 million in ECS funds for fiscal year 2020 and an additional $39.4 million for fiscal year 2021. “While some towns that are losing student population will receive a little less, other towns with growing populations and more kids in need will see more investment,” Lamont said. No ‘Wisconsin moment’ Every year some legislators put forth bills to decimate collective bargaining. Lamont was clear that he supports labor unions and the middle class. He told legislators, “Some of you think Connecticut needs a ‘Wisconsin moment’—where we walk away from collective bargaining and tear up the contracts. I want an anti-Wisconsin moment—a Connecticut moment—where we show that collective bargaining works not just for retirees but also for the next generation of state employees, and the next generation of taxpayers.” Retired Teachers’ Health Insurance Fund The governor’s budget contributes the full required appropriation to the Retired Teachers’ Health Insurance Fund, a significant improvement over many recent budget proposals. The legislature fully funded the Retired Teachers’ Health Insurance Fund in 2018 but had failed to do so for a number of years previously, putting the fund’s solvency at risk. State law requires the state to make a 33.3 percent contribution to the fund, but the governor and legislature have often overridden this law, while active and retired teachers have each continued to contribute their share. The fund provides a subsidy to retired teachers that covers a portion of their health insurance costs. $15 minimum wage and paid family leave In his proposal, the governor also addressed issues CEA has backed (see box at left) to strengthen the state’s middle class. The governor is proposing an increase to a $15 minimum wage over four years, and a paid family medical leave program that would be funded by a 0.5 percent payroll tax on participating employees. Minimum wage would reach $15 an hour by 2023, and beginning in fiscal year 2022, family medical leave benefit payments would be available to employees, including public employees, such as teachers, through collective bargaining. “We all know that workforce development can’t happen without our state’s working families,” Lamont said. “Many households in the 21st century have either two working parents or a single parent juggling multiple responsibilities, including caring for infants and elderly. A $15 minimum wage, enacted responsibly and over time, would raise wages for almost a third of our workforce, a third of whom are female workers, forty percent of whom are African-American workers, and more than half of whom are Hispanic workers.”

Lamont’s budget includes provisions for teacher pensions and school funding.

second and third jobs to support themselves and their families. Many teachers, including those in the governor’s hometown of Greenwich, can’t afford to live in the towns where they teach due to the high cost of living.” Lamont indicated his willingness to continue the dialogue, saying, “My door is always open.” “We recognize the challenges the governor and state legislators face in balancing the budget, and we appreciate the governor’s willingness to continue discussing the issues,” says Leake. “There are solutions to the state’s pension debt problem that do not require shifting the burden to local taxpayers. We intend to have

conversations with the governor on this important issue and others, and we look forward to working with the administration and legislators to develop a responsible budget that manages future pension costs and keeps the state’s promise to teacher retirement without a cost shift to cities and towns, and ensures that Connecticut students have the best and brightest teachers in the classroom.” Education funding Under the governor’s budget, the Education Cost Sharing (ECS) formula would remain largely the same, but scheduled reductions and increases to towns currently funded above or below statutory levels would be

CEA Urges Pro-Growth Agenda, Passes Resolutions in Support of Living Wage, Paid Family Leave In advance of Governor Lamont’s budget address, CEA joined other members of the labor community at a press conference calling on the state to adopt a pro-growth, investment budget. Labor leaders pointed out that austerity budgets haven’t worked elsewhere, leading to massive cuts to education and infrastructure in places like Kansas. There is no reason to believe a similar approach would work in Connecticut. CEA President Jeff Leake said, “It will take all of us, working together, to solve the challenges facing Connecticut. We must invest in our future and make sure that our ability to recruit and retain a high-quality, diverse teaching force isn’t impacted by concerns about pensions and education funding.” For Connecticut to prosper, all residents need better opportunities, which is why the CEA Board of Directors formally passed resolutions in support of raising the minimum wage and ensuring paid family leave this winter. “When children don’t have a safe home, enough to eat, or regular medical care, they’re not able to focus on academics when they come to school,” says Leake. “When parents have to work two or three jobs to pay the rent, they don’t have time to read to their children, to help with homework, or to attend school events. Ensuring a living wage would help Connecticut families provide a brighter future for their children.” Connecticut’s minimum wage of $10.10 an hour is currently the second lowest in New England, even though the state has some of the highest cost of living areas in the region. In encouraging the state to extend paid family leave to all workers, the CEA resolution also encourages employers to provide flexible work schedules and paid leave so that parents and guardians can attend parent-teacher conferences and school-related activities. “We know that family engagement is key to students’ success at school, yet many families face obstacles that prevent them from being involved in their children’s education,” Leake says. “We need policies to break down those barriers and help close the achievement gap.”

Members of Connecticut’s labor community, including Norwalk Federation of Teachers President Mary Yordon (at podium) and CEA President Jeff Leake (standing at left), join together at a press conference ahead of the governor’s budget address.