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State Treasurer Outlines Teacher Pension Problems, Suggests Fixes

State Treasurer Denise Nappier offered a presentation to the state’s Pension Sustainability Commission outlining the difficulties facing Connecticut’s Teachers’ Retirement System and suggested transferring $3 billion in state assets and bonds to teacher pension fund.

That $3 billion includes $1.5 billion in CT Lottery-backed revenue bonds and another $1.5 billion in other state assets.

Nappier estimated the move would save Connecticut $441 million per year.

Nappier included this cartoon in her presentation to the Pension Sustainability Commission

“From day one of my administration, I’ve called on governors and legislatures to meaningfully address the State’s commitment to responsible funding of pension obligations,” Nappier said in a press release. “Years of kicking the can down the road have deteriorated the health of the fund, and the State now finds itself in the midst of another fiscal storm.”

Nappier pointed out the state underfunded teacher pensions by $979 million between 1991 and 2005, and then took out a $2 billion pension obligation bond in 2008 in an effort to boost the pension fund.

“The Teachers’ Retirement System has had a funding problem for decades,” Nappier wrote in her presentation. “Today, despite repeated warnings, the bill has come due.”

That bill could be substantial. Although the Center for Retirement Studies at Boston College projected the state’s teacher pension payments could spike to $6 billion per year, Nappier says based on past trends, the cost will likely rise to $3.25 billion by 2032.

That figure is three times the amount the state currently pays toward the teacher pension system.

TRS is currently only 57.7 percent funded with $13 billion in unfunded liabilities, according to the Treasurer.

Part of the problem with TRS has to do with previous assumptions that TRS investments will return 8 percent, but the fund has only returned 7 percent on average.

The discrepancy between the assumed rate of return — known as a discount rate — and the actual returns means that even when the state is making its full annual required contribution, the state is still underfunding the system.

Nappier argued the discount rate should be reduced to 7.5 percent at first and then 7 percent over the long-term.

A higher discount rate allows the state to make a smaller yearly contribution to the fund. Reducing the discount rate – while more realistic — requires the state to increase its contribution and increases the unfunded liability.

She also recommended paying off the pension obligation bonds in 2026 and then re-amortizing the debt – similar to what Gov. Dannel Malloy did with the State Employee Retirement System in 2017.

The re-amortization would lower the annual payment but also stretch out teacher pension debt payments over a longer period of time. The Treasurer’s Office estimated the savings to be $5.1 billion.

Gov. Malloy attempted to re-amortize the teacher pension bonds in 2018, but Nappier said that would violate the 2008 bond covenant and ruin Connecticut’s credit rating – which has already been lowered in recent years due to the state’s debt problems.

The Pension Sustainability Commission was formed to examine whether the state could sell or transfer state assets in order to help better fund the TRS. The Commission on Economic Growth and Fiscal Stability in 2018 recommended transferring the state lottery system to TRS.

The lottery system generates about $330 million annually, which is used to help fund Medicaid, the Department of Education, Libraries and Education Services and debt service.

Nappier did not seek re-election as State Treasurer in 2018 and will be replaced by Shawn Wooden, former President of the City Council of Hartford.

Marc E. Fitch

Marc E. Fitch is the author of several books and novels including Shmexperts: How Power Politics and Ideology are Disguised as Science and Paranormal Nation: Why America Needs Ghosts, UFOs and Bigfoot. Marc was a 2014 Robert Novak Journalism Fellow and his work has appeared in The Federalist, American Thinker, The Skeptical Inquirer, World Net Daily and Real Clear Policy. Marc has a Master of Fine Arts degree from Western Connecticut State University. Marc can be reached at [email protected]


  1. jim
    November 21, 2018 @ 8:58 pm

    Transferring 1.5 billion in CT Lottery-backed revenue bonds and “other state assets” to the TRS system will NOT save CT taxpayers 441 million. It does nothing to change the underlying expenses which are the benefits of the retirees and future benefits of current members of TRS. Transferring a revenue source from the operating budget to the TRS Pension fund just leave a hole in the budget. Transferring a non-revenue asset to the TRS will reduce the “Annual Required Contribution” leads to more underfunding, like the over optimistic discount rate. The real cost of a teacher working 35 years to get a 70% pension is a cost incurred in the 35 years of work, not a cost incurred after retirement. We just pay it out after their working career is over.

    If in 2010, we had to buy an annuity for each and every active TRS member for the pension they earned that year, the cost would have exceeded the 559 million of Annual Required Contribution. In 2010 there were 51,368 active members averaging 71k per year in salary for a total covered payroll of 3.646 billion. Those 50k teachers just added 2% to their pension benefit. That is 73 million for a year. But, that 73 million additional pension benefit will grow as their salary increases and continue for all of the years of retirement , perhaps 20 – 40 years. It will be increased by COLAs that will offset much of the discount rate. So what is the real cost of the benefits earned by those 50,000 teachers in 2010. Let’s say the average teacher retires at 57 and lives to 87. So the 2% earned in 2010 will increase their pension $1420 per year for 30 years so it is $42,600 in 2010 dollars. Multiply this by 51,368 teachers and you get a cost of 2.2 billion. This far exceeded the ARC of 559.

    Many people have been stating that these pension problems we created in the past and that none of the problem accumulated in the Malloy years. That is not correct. The problem grows every year and our politicians the unions do not want us to understand the true cost of the pensions being earned now.


  2. Amanda Bedini
    November 22, 2018 @ 11:09 am

    That issue has suffered from gross mismanagement for too long. The whole pension system needs to be reworked to make it a reasonable system without all the loopholes. As usual there is abuse of the system that also should be addressed


  3. alan
    November 22, 2018 @ 3:13 pm

    People don’t have any idea of how bad this is. When you pay a teacher a salary that is similar to a mid manager at UTC(where I worked) with a STEM degree working year round(a teaching degree compared to a STEM at UConn would be like Calhoun’s St Josephs team playing Calhoun’s Conn team) and make it impossible to downsize through tenure even though enrollment is plummeting you would be surprised at results. I know of phys ed and grammar school teachers making 100k, even librarians(openthebooks.com) who will demand 70k pensions. 3000 teachers in Fairfield county make 100k+, and even in Killingly, Waterbury etc 90k is not uncommon. The pension we paid to a teacher at 35 years work retiring last years was 60577 on a salary of $92286 at age 62.7(TRS numbers) which makes every pension the equivalent to a $1,200,000 annuity from mass mutual. Every business nows this so will not expand here without tax breaks to hold them harmless and all have plans to leave when the bill comes due. By the way the TRS says the avg teacher makes 77803 at age 44.7.(does not include pension). Parents should think of this when they buy their Dunkin teacher gift cards this year.


  4. Paula Berglund
    March 3, 2019 @ 2:35 pm

    The perk to work…how easy it is to bash public educators….who start out at a base pay of roughly 35,000….how many pay freezes, they have endured throughout their careers to keep salary steps stagnant with no pay increase. Only after a 15-20 year salary step. increase….they MAY make it to a top step of a state average of about 80,000. Don’t forget about the masters degree investment that a teacher must have. A career of 35 years means that a teacher contributed to their pension on a continual basis. With that pension that is well deserved, teachers are still required to pay an excessive monthly amount for healthcare once retired. Today’s society has it all backwards….pay for those that want to sit home…individuals that have working extremities so they can receive free rent, healthcare, meds, groceries, heat, cell phones, daycare….etc. etc….the list is magnanimous. People love to bash educators…go try it one day….go to college…get the degree…get into the classroom and see if one doesn’t earn every penny….and with those pennies did you think we were just going to have money taken out along with the state, federal tax, health insurance rates, and not get ANY return after 35 years of steady work….honestly…work needs a perk!


  5. Paula Berglund
    March 3, 2019 @ 2:57 pm

    FACT vs. MYTH…good read!

    One of our main advocacy priorities for the upcoming legislative session is to dispel
    several popular myths about the benefits available to retired teachers.

    Our retirement benefits are dependent on legislative decisions and past government promises. Connecticut teachers do not contribute to Social Security; however, they do contribute 7 percent of their annual income to the Teachers Retirement Fund and 1.25 percent to their Health Insurance Fund with the belief that these funds will be sustained in their retirement years. In addition, they contribute 1.45 percent for Medicare. Retired teachers who do not have Medicare coverage pay approximately $400 up to $1,200 per person, per month. For health care, retirees monthly premium costs coupled with monies paid from their HIPA fund result in retired teachers paying the bulk of their own insurance coverage.

    Over the years, while teachers contributed to their retirement funds and health care costs, state budgets did not adequately contribute to the Teachers Retirement Fund and to the Health Insurance Fund. As a result, there is an unfunded liability of more than $13 billion in the Retirement Fund and approximately $200 million in default to the Health Fund. Unless these funds are maintained, Connecticut will no longer be able to attract and keep qualified educators to maintain its high standards of education.

    The latest projections indicate that, unless the legislature fully funds their statuary one-third share, the [Teachers Health Insurance Fund] will become insolvent in 2020.
    Our Health Insurance Fund is in a particularly urgent crisis. The latest projections indicate that, unless the legislature fully funds their statuary one-third share, the fund will become insolvent in 2020. This fund was established by retired teachers to help defray the cost of insurance premiums in their retirement years. To be clear, even with the state’s required contributions to this fund, retired teachers presently pay for most of their own insurance costs.

    In response to Connecticut’s financial condition, many news reports have focused on the State’s pension liabilities and the need to change government pensions. Many of these articles confuse the pension contributions of teachers with the pension contributions of state employees.

    These reports ignore the fact that teachers contribute a significantly larger portion of their salaries toward their pension and are not able to fully participate in the social security system. There is also a casual disregard for the fact that both retired teachers and state employees have paid their fair share to ensure a solvent system while state government has not.

    CT Realtors – Save Home Values
    Presently the legislature is exploring ways to address the problem of adequately maintaining these funds. The legislature formed the Connecticut Pension Sustainability Commission to study the feasibility of placing state capital assets in a trust and maximizing those assets for the sole benefit of the state pension system. A proposal was made by the past administration to dedicate lottery assets to the cash-starved teacher retirement benefit fund. The Association of Retired Teachers of CT (ARTC) is open to these and other ideas designed to stabilize the pension system and pledges to work together with policymakers to achieve this.

    Ed Messina is the President of the Association of Retired Teachers of Connecticut.


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