Teachers’ Pension Costs – The Worst Part of the Governor’s Budget Proposal

The transfer of Teachers’ Pension costs from the State to the towns is the worst part of the Governor’s Budget proposal. This hurts every town and city especially seniors, low income property owners and small business owners. Let’s take a look at Fairfield.

This is a State program to pay for Teacher Pensions. It was developed by the State. It was promised by the State. It was designed by the State. As towns, we had no input.  We didn’t cause the problem. The State is solely responsible for the designing of a program that isn’t sustainable and then compounding the problem by not funding it.  The State doesn’t want to make any changes to the program. It just wants to pass the costs on to the towns. This is just plain wrong and fiscally irresponsible.

Let’s look at the facts. Let’s look at all the ways this is bad for the towns and the State.

First, the Teachers’ Pension Program is primarily funded by state income tax, a progressive tax system. Those taxpayers with the most income pay the largest share. By moving this expense to the towns, it would be funded by property tax or a regressive system. Every taxpayer pays at the same rate regardless of income.  This moves the expense to towns unfairly burdening our seniors, our lower income property owners and small businesses.  Connecticut towns already have the highest property taxes in the nation.  This cost alone will increase Fairfield taxes by 3% this year and more every year in the future. A program that makes our property taxes higher hurts everyone in the State. This is not a solution.

Second, this approach changes nothing! The Pension funding problem remains unchanged. The State is abdicating its responsibility to find a solution. This hurts our towns and cities alike. Although Fairfield may be viewed as a wealthy town, all of our residents are not wealthy. This approach unfairly burdens seniors, lower income property owners and small businesses hurting our local economy.

Third, this cost would become our fastest growing expense in the future. The current Pension plan assumes an 8% discount rate or expected rate of return on investments. This is one of the highest assumptions in the nation. The plan is also underfunded. The combination of these two conditions means this expense will grow faster than any other line item in our budget. This guarantees higher property taxes in the future for all towns.

Fourth, it was suggested by someone in the State Administration that the wealthier towns, such as Fairfield, need to have some “skin in the game” and that these towns have been receiving a “hidden subsidy” from the State. This comment is either incredibly naive or a complete misrepresentation. How can someone suggest that a town like Fairfield has no “skin in the game” when we contribute over $200 million through income tax alone to the State budget? Where does that person think the State gets its money? It is equally incredulous to suggest that Fairfield is getting a hidden subsidy when we give the State $200 million in income tax and our teachers’ pension costs are $27 million.  How does one call it a subsidy when it is our money the State is using?  Fairfield is subsidizing the State not the other way around. Simply put, this is 100% a State problem and the State needs to take responsibility to fix the problem.

If Fairfield doesn’t have to pay $9 million in Teachers’ Pension costs to the State, we can do the following: restore the proposed budget cuts to our schools, our library, and Public Works, and lower our projected mill rate increase. We have to come together to help fight this proposal. We need to demand a better solution from the State. We need to keep these dollars in Fairfield.

I am working with our State Delegation, joining with other Mayors and First Selectmen, supporting the efforts by CCM and personally meeting with Assembly leadership to stop this pension cost transfer. I am asking all Fairfield residents to join together in contacting our State Delegation and State Assembly leadership to demand a better solution for our town and all of Connecticut. The Governor has made his proposal. The final budget recommendation is now in the hands of the State Assembly.

Here are the key people to contact:

Thank you for your help and support, Mike.