Malloy Proposes Shifting $400M Teacher Pension Burden to Towns, Hints Cuts to Property Tax Credit

Gov. Dannel Malloy's latest budget proposal would shift about $400 million in teacher pension obligations to municipalities as the state looks for ways to close its projected $1.5 billion budget hole.

Currently the state pays 100 percent of the employer share of pension contributions for teachers across the state and is expected to pay $1.2 billion this year. The $1.2 billion represents about one-third of state total educational aid and close to a quarter of total municipal aid.

Malloy said people often think of educational funding as funding students and schools but leave the cost of teacher pensions out of the conversation.

"At a time when state government is making difficult cuts to services, we can no longer afford to exclude how we pay for teacher pensions from the conversations," he said. "This is not a change to the benefits – we must keep our promises to those who have dedicated their lives to educating our children."

The governor also hinted at a proposal to reduce or eliminate the $200 property tax credit toward state income taxes, which would affect about 875,000 middle class tax filers, according to the CT Mirror.

The teacher pension proposal would hit wealthier towns harder because those communities typically pay teachers at a higher rate, according to the CT Mirror.

The state will contribute $24 million this year to fund Greenwich teacher pension obligations for a system that has 8,800 students. Meanwhile the state will pay $17 million to cover New Britain teacher pensions even though that school system has 1,200 more students than Greenwich.

Currently teachers contribute 6 percent of their salary to the fund while the state's share equals 30 percent of salary. Under the new proposed system towns would contribute about 10 percent of teacher salary. Teachers would continue to pay six percent.

Teachers participate in the pension plan in lieu of social security benefits.

Malloy is also proposing keeping the state income tax exemption for pensions of teachers who continue to live in Connecticut after retirement. The 50 percent exemption which starts this year would be preserved going forward.

Malloy also plans to increase state funding by $10 million to the Retired Teachers' Healthcare Fund in 2018 and another $3.7 million in fiscal year 2019.

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