“A profession as noble as teaching deserves retirement security,” State Treasurer Shawn Wooden told hundreds of Connecticut public school teachers this morning, to resounding applause. “I support you, the hard work you do every day, the strength you bring to the classroom, the minds you are shaping, and the promise of what we are working together to achieve.”
Wooden, whose plan to stabilize Connecticut’s teacher retirement fund was a crucial victory for teachers and taxpayers this past legislative session, gave the keynote address this morning at CEA’s Summer Conference, where more than 500 educators gathered for two days of networking and professional development.
“Thanks to the plan crafted and promoted by State Treasurer Wooden and championed by CEA, the long-term solvency of the teacher retirement fund is secure,” said CEA President Jeff Leake.
“For decades, the state underfunded teacher pensions, putting educators’ retirement at risk, but Treasurer Wooden had the foresight and a sound proposal to set things right for educators today and into the future.”
Leake called upon teachers to continue building relationships with elected officials and others.
“It’s about strengthening our profession and continuing to influence positive change. Our union demands it.”
Wooden noted that his proposal puts the state’s budget reserves on track to grow to historic levels, adding that the state’s credit outlook has improved twice in four months, with a savings of millions of dollars in long-term interest payments for taxpayers.
The root of the problem
In the 1950s, Wooden explained, public school teachers opted out of joining Social Security and created their own independent retirement system. Over the next 25 years, the state paid retirement benefits out of each year’s state budget on a “pay-as-you-go” basis, which led to another plan in the late ‘70s that covered benefits and paid down the unfunded liability based on an actuarial valuation.
“And this is where the situation really began to decline,” he said, “because politicians got into the very bad habit of spending the state’s required pension contributions on other things. So the system sputtered along for the next three decades, and that’s how the unfunded liability got so out of control.”
In 2008, in an effort to boost the fund and reduce the unfunded liability, the state borrowed $2 billion through pension obligation bonds—a plan that might have worked if the market had not collapsed that year and devastated the fund.
“That’s when years of backloading―or big balloon payments―caught up to us, and the state faced huge spikes in future payments. Annual payments into the fund were projected to peak in 2032 at more than $3.4 billion, which would have crippled the state budget.”
The plan that Treasurer Wooden created with Governor Lamont reamortized the $13 billion unfunded liability, extending the payment schedule over 17 years; it also lowered the assumed rate of return on investments from 8% to a more conservative 6.9%. The new plan, Wooden said, does several important things: it allows the state to honor its commitment to teachers, it saves the state an estimated $900 million over the next five years, it smoothes out gains and losses over time, and it replaces the old funding method (backloading costs with balloon payments) with a more sensible approach.
It’s that fiscally prudent approach, Wooden noted, that helped lead to upgrades in Connecticut’s bond rating outlook for the first time in nearly two decades.
“Indeed,” said Leake, “the state treasurer’s actions are already being noticed on Wall Street as investors and bond agencies elevate Connecticut’s bond ratings, which in turn will save taxpayers millions of dollars.”
A personal challenge
Wooden, who began his career as a private-sector investment attorney and now oversees public pension plans, notes that ensuring the long-term viability of the Teachers’ Retirement Fund was one of his highest priorities upon taking the oath of office.
“This was a very personal challenge for me. I have always believed that the state has a duty to honor our promises to our workers and taxpayers, and I am especially grateful to the many teachers who helped me to become the person I am today.”
Referencing a report published last week showing a 30% increase in Connecticut children living in concentrated poverty, Wooden touched on a reality teachers see every day.
“Perhaps no other profession today has the challenge of attracting and recruiting good talent as does teaching,” he said, “and that noble calling to teach comes with a price too. Nationally, teachers spend a billion and a half dollars of their own money on back-to-school supplies, and teachers in high-poverty districts spend even more. Connecticut teachers spend on average between $500 and $1,500 annually. As is often the case where parents are financially unable to provide the necessities, teachers fill in the gaps and provide for them. There is no question that as teaching professionals you are fulfilling the highest calling in public service. It’s because of your great talent, the years of experience you offer, and your dedication that another new study also issued last week reported that Connecticut’s public schools are among the best in the nation.”
Paying it forward
Wooden recalled his days as a student in the Hartford Public School System as well as in Manchester, as part of a desegregation busing program, before pursuing degrees at Trinity College and NYU Law School.
“Growing up, I took multiple transit buses two hours each way to attend school. Suffice it to say, this was very hard, and that experience helped shape the value I place on education.
“The truth is that most kids I grew up with in my neighborhood in North Hartford are not investment lawyers and don’t get to stand on stages like this. I wouldn’t be standing before you today were it not for the many teachers who challenged and inspired me. Simply put, a quality education with teachers who believed in my potential changed the trajectory of my life, so it’s time we focused on drawing the best talent to the profession and ensuring that teaching is made more secure as we go forward—and not back.”
Susan Strader, CEA-PAC member and president of the Education Association of Preston, said, “To have Shawn Wooden speak today at the conference and explain the plan he and the governor put into place to support our pensions and keep them funded was really wonderful. It was uplifting, and everyone was able to understand how it works.”
“We thank Treasurer Wooden for his expertise on the issue and for sharing the development and design of his plan with hundreds of educators today,” Leake said. “The education community applauds his commitment to securing the pension fund for Connecticut’s hard-working teachers and moving Connecticut toward fiscal stability and greater economic growth.”