Governor Rell Signs Teachers’ Retirement Bill Into Law

Bill Authorizes $2 Billion in Bonds to Reduce Unfunded Pension Liability

            Governor M. Jodi Rell today signed Public Act 07-186, An Act Concerning Adequate Funding of the Teachers’ Retirement System, which authorizes $2 billion in Pension Obligation Bonds to help close a $6.9 billion shortfall in the teachers’ pension fund. The law also requires the State to fund the Teachers’ Retirement Fund at 100 percent of the actuarially recommended contribution over the life of the bonds which will also reduce the State’s long-term liability.

            “Teachers should not have to worry that there will be insufficient funds for their retirement pensions,” Governor Rell said. “We ask a great deal of them and we expect a great deal.  We place our most precious resource – our children – in their hands.  We are entrusting our future to our teachers and we must keep our promise to them.”

            Currently, the unfunded liability of the Teachers’ Retirement Fund stands at $6.9 billion because the State has failed to fund the pension system at the actuarially recommended levels for the last two decades – except in each year of Governor Rell’s administration when it did contribute the full amount.

            There is $10.2 billion in the pension fund which represents 59.5 percent of its obligations.  The State currently foregoes 8.5 percent in investment earnings on the unfunded liability and the issuance of $2 billion in bonds with a maturity of 25 years will allow the State to refinance a portion of the debt at a lower interest rate – estimated at 5.6 percent – and achieve a substantial savings over the term of the bonds.

            The budget signed last year 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 two decades and last year we finally took appropriate action to begin to address the unfunded liability,” Governor Rell said.

“This bill takes us even further in the right direction toward long-term adequate funding of the Fund.  We want to encourage the very best people to enter the teaching profession and ensuring the stability of the pension system will help accomplish that goal.”