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Over the past few years, as the state debates its budget, municipalities have held their breath, waiting to see if the state would levy a portion of the teacher pension liability on to towns. With the state legislature set to adjourn in a few weeks, the possibility of a required municipal teacher pension contribution remains.
On May 13, the Madison Board of Selectmen (BOS) debated crafting and signing a resolution declaring the board’s opposition to paying a part of the pensions, but while all selectmen seemingly agreed on the principal of the matter, the language and content of the resolution raised numerous questions of politics and the role of the BOS.
In Connecticut, the state administers teacher pensions and has done so since the early 1900s. As part of the plan, teachers contribute a set amount to their pensions each year. The General Assembly is also supposed to contribute a set amount to the pension plan, but has failed to do so for several decades. As a result of decades of neglect, the unfunded liability of the teacher pension plan is currently in the billions, a figure so daunting that governors and legislators have considered pushing some of the costs onto municipalities.
Former governor Dannel Malloy was first to suggest towns start paying part of the pension plan. Current Governor Ned Lamont brought the suggestion back in his budget proposal earlier this year. Under his proposal, towns would be asked to pay what is known as the “normal cost” of the pension, which is what Connecticut should set aside each year to cover current teachers, and not the ballooning unfunded liability that resulted from decades of underfunding by the state legislature.
Under that plan, Madison would be asked to pick up $150,783 of the teacher pension in the first year of the budget and $311,381 in the second year; the town has not included those figures in its budget. Budget negotiations are ongoing up at the capitol now and while a recent budget proposal from the legislature doesn’t include a teacher pension shift, some members of the Madison BOS are still nervous about what could happen in the next few weeks.
At the May 13 BOS meeting, First Selectman Tom Banisch asked fellow selectmen to sign a resolution declaring Madison’s opposition to a pension shift.
“This came as a result of my involvement on the executive board of the Connecticut Conference of Municipalities [CCM],” he said. “We have taken a bipartisan effort on the board to basically pass resolutions stating our opposition to the teacher pension costs to towns based on the fact that this is a problem that was created by the state. They did not fund the pensions properly and now the way they want to fix that is by dumping the cost on us. This would be a property tax issue for us, because we have no other way to cover this other than just taxing people more. We are talking about some pretty big numbers, numbers that would move our mill rate if we are forced to do this.”
Selectman Bruce Wilson said he didn’t see this as a political issue. He said the problem is Madison would be asked to send money to Hartford for a pension plan it did not negotiate and, because Madison is considered a wealthy town, it would be asked to send more than its fair share.
“When you look at the way this is being done around the state, towns like Madison are not being treated the same as other towns, so New Haven, for instance, will have to pick up some of the pension contribution, but the budget also gives them far more educational aid,” he said. “Those increases in educational aid more than offset the pension, so they will still see a net increase in aid from the state and we are going to see and net decrease in aid from the state and at the rates we are talking about, this is real money.”
The text of the resolution Banisch said came from Newtown but was tweaked to fit Madison.
Democrats on the board were initially opposed to signing the proclamation, not because of the message, but because of the process according to Selectman Scott Murphy.
“I support the need to reject the impact on our town budget, however I think if we are going to put together a resolution that includes all five of us, we should discuss the issue,” he said. “I am unprepared and would ask that we table this conversation until such time as I have a chance to read through this, edit it, and provide my commentary.”
Banisch said he wanted to move quickly because the legislature is moving quickly, but some selectmen had concerns about issues larger than timing.
The Role of the BOS
Selectman AL Goldberg (D) said in his 14 years as an elected official, this is the first time the selectmen have been asked to take a formal position on an issue being debated up at the state legislature. He said he was concerned that the BOS might be overstepping.
“I would hate to see Madison taxpayers nailed with another uncontrollable expense, but one way or another the public is going to end up having to pay for these things, whether it’s through the Madison budget or through the state budget, but at this moment in time I do not know what the Madison public wants,” he said. “Our job is to govern this town and the voters have put us into office to do that and put other folks into office to represent us up in Hartford and I am thinking this is not our business here. If we do decide it is our business, then I think we need a lot more information before we start taking positions.”
Goldberg said he’s concerned about the precedent and asked where the BOS would draw the line after this step.
“Why are we not taking a position on tolls then or all the other things on the table?” he asked. “Suddenly we would find ourselves as the board spending a lot of time and energy taking positions on what is in front of the legislature. I’m just thinking this is really not our job.”
Wilson said Goldberg makes a good point, but said he sees this issue as separate from something like tolls because while tolls would have an effect on the people of Madison, a shift in teacher pensions would be a direct hit to the Madison operating budget.
“We talk consistently about the regressive nature of property taxes,” he said. “We take local action here to try to insulate some of our most at-risk property owners by freezing their taxes and the designed solution for this [teacher pension] problem is in the progressive income tax and they [the legislature] have failed in that effort and are now trying to shift it into a regressive tax [property taxes]. I get it’s a bit of an oval peg in a round hole moment for us, but given the inconsistency in language coming out of the state capitol, I do think it is appropriate for us to raise our voice and say, ‘This doesn’t work.’”
Coming to Terms
While some on the board wanted to wait before voting, eventually the selectmen ended up editing the text of the resolution on the fly, debating everything from the scope of the message to the order of paragraphs to sentence structure.
Banisch said as CCM continues to meet with the governor, and the hope is to push any pension contribution off for at least a year until a better plan can be reached.
“I think the longer-range thinking in this whole thing is when something happens with the teacher pensions, we want the town to be involved in the negotiation and what follows so that we are accepting a liability that we agreed to in advance, not one that is being shoved on us after the fact,” he said.
After nearly an hour of debate, the five selectmen settled on text on which all could agree, but it was clearly not an easy process when, near the end, after the person recording the meeting asked if the selectmen would like the text read back to them, a member of the audience said, “God, no. End this suffering.”
The selectmen finally did. The resolution was unanimously approved.
The Final Text
Whereas the Madison Board of Selectmen understand the serious fiscal challenges facing the State of Connecticut;
Whereas Madison residents pay the state substantial income and sales taxes, they also shoulder a heavy property tax burden, which is in part due to persistent underfunding of municipal aid by the state;
Whereas the Madison Board of Selectmen reject the proposal to shift a portion of the “normal cost” of the Teachers’ Retirement System (“TRS”) onto Madison residents;
Whereas the current TRS proposal offers no assurances the state will make its required contributions to the fund; and thus the diversion of Madison property taxes to the TRS cannot guarantee its solvency;
Whereas the current TRS proposal misses the important fact that teacher’s salaries are largely determined by the bargaining climate in the state, salaries in surrounding towns, binding arbitration and cost of living;
Let it be resolved that The Madison Board of Selectmen cannot support assuming an open-ended obligation for which the town does not have a role in negotiating the benefit structure nor managing the investment outcome. It is the position of the Madison Board of Selectmen that the TRS proposal as it stands will negatively impact education and other municipal services.
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