The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of June 30, 2014, the most recent date for which an actuarial valuation is available, Connecticut's pension system for teachers is 59.0 percent funded, an increase of 3.8 percentage points since NCTQ's last report. Its current pension debt is almost $20,000 per pupil throughout the state. Connecticut also has a 20.4-year amortization period. This means that if the plan earns its assumed rate of return of 8.50 percent and makes its full actuarially determined contribution payments, it would take the state more than 20.4 years to pay off its unfunded liabilities. While its amortization period meets regulatory requirements, Connecticut's funding level is exceptionally low. The state's system is not financially sustainable according to actuarial benchmarks.
In addition, Connecticut commits excessive resources toward its teachers' retirement system. The current employer contribution rate of 23.65 percent, which is paid by the state, remains too high. While this rate allows the state to pay off liabilities within a 30-year period, it does so at a high cost, precluding Connecticut from spending those funds on other, more immediate means to retain talented teachers. The mandatory employee contribution rate of 7.25 percent is reasonable considering that teachers are not also making contributions to Social Security.
Connecticut State Teachers’ Retirement System, Actuarial Valuation as of June 30, 2014.
The state would be better off if its system was over 95 percent funded to allow more protection during financial downturns. However, Connecticut should consider ways to improve its funding level without raising the contributions of the state and teachers. In fact, the state should work to decrease employer contributions. Committing excessive resources to pension benefits can negatively affect teacher recruitment and retention and crowd out funding for other areas in education. and crowd out funding for other areas in education. Improving funding levels necessitates, in part, systemic changes in the state's pension system. The goals on pension flexibility and pension neutrality provide suggestions for pension system structures that are both sustainable and fair.
Connecticut did not respond to repeated requested to review this analysis.