State to defer $100 million in pension payments

State employee union officials said Thursday they have agreed to a plan by Gov. M. Jodi Rell’s administration to delay $100 million in contributions to their pension fund–a move that shrinks the budget deficit projected for this year, but adds to the state’s $15.8 billion in long-term, unfunded pension obligations.

“It’s better than cutting spending,” said Dan Livingston, the  chief negotiator for State Employee’s Bargaining Agent Coalition. “We think a temporary increase in revenue would have been better though.”

The coalition’s acquiescence was a formality: Rell had the right to reduce the payment under terms of an agreement reached last year with SEBAC on concessions to save the state $750 million over two years in return for a promise of no layoffs until July 2011.

That agreement included a provision allowing the state to defer up to $100 million in pension payments if revenue fell $300 million below expectations. The state now has a projected $513 million deficit for the fiscal year that ends June 30.

“We have no choice but to discuss additional measures with them that might be able to help the situation,” said Jeffrey Beckham, legislative affairs undersecretary for Rell’s budget office.

Livingston said the decision to pay $600 million this year instead of $700 million to the pension fund will have no affect on state employees.

“It’s akin to an individual paying $1,500 a month on a mortgage and during tough times cutting that payment back to $1,400 a month,” he said.

Given the current budget problems and Rell’s history of proposing spending cuts to close the budget gap, union leaders said defering the pension payment to protect programs made sense.

“Some programs are just too vital,” said Sal Luciano, executive director of Council 4 of the American Federation of State, County and Municipal Employees. But he added, “Clearly if you continue to underfund state pensions then you are talking about very serious fiscal issues for the state.”

In addition to the $15.8 billion in long-term, unfunded pension liabilities, the state faces a $24 billion liability for retirees’ health care and $18 billion in bonded debt.

However, the delay in pension payments will help Rell and the legislature deal with the problem immediately before them. Rell is due to present her proposal for balancing the budget for this year and fiscal 2010-11 on Wednesday, when the legislature convenes.