Governor Rell Authorizes $2 Bilion in Bonds to Reduce Unfunded Liability in Teachers' Retirement System
January 15, 2008
Landmark Sale Bolsters Pension Fund, Requires State to
Continue Meeting Contribution Requirements Over Life of Bonds
Governor M. Jodi Rell today announced that the sale of $2 billion in Pension Obligation Bonds to help close a $6.9 billion, long-term liability in the teachers’ pension fund is expected to gain approval when the state Bond Commission meets January 25.
In July, Governor Rell strongly supported and signed into law Public Act 07-186, An Act Concerning Adequate Funding of the Teachers’ Retirement System, which authorized the issuance of bonds to reduce the liability. The legislation also requires the state to fund the Teachers’ Retirement Fund at 100 percent of the actuarially recommended contribution each year over the life of the bonds.
“This is a momentous day for Connecticut – not only for its teachers but for the generations of students they have educated and the generations of children to come,” Governor Rell said. “Teachers have touched all of our lives. Their energy and devotion have molded us, and our children. They should not have to worry whether there will be money enough for the retirement benefits they have earned.
“We demand much from teachers – and rightfully so, since they are the ones we trust to educate our most precious resource,” the Governor said. “Teachers, in turn, trust state government to make good on its commitments to them, now and in the future. We must keep our promises, not only to current teachers but to those we hope to encourage to enter the profession in the future.”
Currently, the unfunded liability of the Teachers’ Retirement Fund stands at $6.9 billion, largely because the state has failed to make the full annual deposit into the system – except in each year of Governor Rell’s administration, when it full amount was paid.
The fund currently contains $10.2 billion, which represents 59.5 percent of its future obligations. Under Public Act 07-186, the state will borrow $2 billion at favorable interest rates to invest in the pension fund to make up for past failures to fully fund the recommended annual contributions. The investment of $2 billion at the fund’s actuarial investment rate of 8.5 percent is expected to significantly reduce the long-term unfunded liability.
The budget signed in 2006 by Governor Rell authorized $245.6 million to fully finance the Teachers’ Retirement Fund for FY 2006 and FY 2007. The new state budget also makes full payments in FY 2008 and FY 2009.
“The fund has had a chronic shortfall for the two decades before my tenure. I am pleased we are taking appropriate action to begin to address the unfunded liability,” Governor Rell said.