Free Daily Headlines :

  • COVID-19
  • Money
  • Election 2020
  • Politics
  • Education
  • Health
  • Justice
  • More
    • Environment
    • Economic Development
    • Gaming
    • Investigations
    • Social Services
    • TRANSPORTATION
  • Opinion
    • CT Viewpoints
    • CT Artpoints
DONATE
Reflecting Connecticut’s Reality.
    COVID-19
    Money
    Election 2020
    Politics
    Education
    Health
    Justice
    More
    Environment
    Economic Development
    Gaming
    Investigations
    Social Services
    TRANSPORTATION
    Opinion
    CT Viewpoints
    CT Artpoints

LET�S GET SOCIAL

Show your love for great stories and out standing journalism

Study says state employee pension fund will be broke by 2019

  • by Keith M. Phaneuf
  • June 30, 2010
  • View as "Clean Read" "Exit Clean Read"

Connecticut is one of seven states that will run out of money to pay state employee pensions over the next decade, coming up short in 2019 due to poor savings habits and generous guaranteed benefit levels, according to a recent study by Northwestern University.

And Connecticut’s pension fund could become insolvent sooner than that, according to Joshua D. Rauh, an associate professor of finance at the university’s Kellogg School of Management, if the 8 percent return on investments this state and most others typically count on are not realized in the near future.

The collapse also could be accelerated by retirement incentive programs and deferred annual contributions — two fiscal shortcuts Gov. M. Jodi Rell and the General Assembly have employed over the past two years to mitigate tax hikes and programmatic spending cuts.

“States face the risk that higher inflation and low asset returns could make their systems even more vulnerable,” Rauh wrote. “State governments face a choice between taking more risk today and funding the liabilities to a greater extent.”

Pension woes are nothing new for Connecticut. For more than two decades, governors and legislatures have routinely approved annual contributions to pension accounts far below the level recommended by fiscal analysts to cover current retiree expenses and begin saving to offset future costs.

Connecticut, like most states, provides a defined benefit pension plan, meaning it promises its workers a specific annual payment once they retire. By comparison, the most common plans in the private sector involve defined contributions. Under these, employees save for their own retirement, making investments often matched in part or full by their employer.

According to its last, full actuarial valuation, the pension fund had $19.2 billion worth of obligations and held just under $10 billion in assets, or about 52 percent of its liability.

In February Rell formed the Post-Employment Benefit Commission, a panel of state budget and pension experts from management and labor charged with charting a long-term strategy to improve the system’s fiscal health.

“This study just underscores the reason why the governor put together the commission,” Office of Policy and Management Deputy Secretary Michael J. Cicchetti, who chairs the commission, said this week. “It also underscores the fact that we cannot sit back and do nothing. We have to get our arms around this and make some real changes.”

Cicchetti has urged the panel to investigate a broad range of possible changes to a package of retirement benefits that critics of state government have called too generous. The changes include shifting to a defined contribution system, requiring pension recipients to pay more for health care, and restricting access to health care for workers who leave state service before they reach retirement age.

Under current law, workers with 10 years of state service remain eligible for both a pension and health care even if they leave for other jobs before reaching retirement age.

A new report submitted last week to the commission by a Kennesaw, Ga.-based actuary and health care consultant showed Connecticut’s problem has worsened due in part to a 2009 retirement incentive program that saved $110 million that year. Further complicating matters, the governor and legislature have ordered $314.5 million in union-approved reductions to pension fund contributions to squeeze through tight fiscal straits over the past two years and in fiscal year that starts July 1.

Connecticut, like most states, also is vulnerable because it assumes a healthy return on what money it does invest in its pension program. Most states rely on 8 percent or more — Connecticut assumed 8.25 percent in its 2008 actuarial analysis. This is based largely on the historical average growth of the stock market since 1927.

If Connecticut and other states assumed a more conservative, guaranteed rate, closer to the 3 percent a U.S. Treasury security would yield, Rauh wrote, their pension savings would be even more inadequate.

According to Rauh, under the current scenario Illinois would the first state to face pension-fund insolvency, going belly up in 2018. Connecticut, Indiana and New Jersey would follow one year later, followed by Hawaii, Louisiana and Oklahoma in 2020.

By 2025, 20 state funds will have run out of money, according to Rauh. By 2030, 31 state funds will be broke. And because the problem is so widespread, he added, taxpayers will find it increasingly challenging to avoid the burden simply by moving to other states.

“There seems to be a high likelihood that future generations will have to bear the substantial burden of making up pension benefits for previous generations of state employees,” Rauh wrote. “While citizens of states that are particularly hard-hit by the pension crisis may be able to escape to other states, an acceleration of this demographic phenomenon would leave a dwindling taxpayer base behind in the states facing the largest liabilities.”

Sign up for CT Mirror's free daily news summary.

Free to Read. Not Free to Produce.

The Connecticut Mirror is a nonprofit newsroom. 90% of our revenue comes from people like you. If you value our reporting please consider making a donation. You'll enjoy reading CT Mirror even more knowing you helped make it happen.

YES, I'LL DONATE TODAY

ABOUT THE AUTHOR

Keith M. Phaneuf

SEE WHAT READERS SAID

RELATED STORIES
Judge approves shorter sentence for convicted murderer turned prison mentor
by Kelan Lyons

The DOC could start screening Clyde Meikle in July for discharge to a halfway house.

Without vocal dissent, Senate confirms Justice Andrew McDonald
by Mark Pazniokas

The state Senate acted quickly Friday to confirm Andrew J. McDonald to a second term on the Supreme Court.

Funding to fix CT’s roads and bridges is drying up, and officials don’t have a solution
by Keith M. Phaneuf and Kasturi Pananjady

Connecticut's transportation building program is on a financial diet after a five-year ramp-up after lawmakers rejected tolls.

Evidence not clear that Trump incited Capitol destruction
by Alan Calandro

Defending President Donald Trump is not popular and I have no interest in writing this other than adherence to truth. Recognizing the truth (if we can find it, which is not always possible of course) should make us be able to come together around that and move on with a common understanding.

Securing our nuclear legacy: An open letter to President-elect Joe Biden
by Erik Assadourian

Dear President-elect Biden: As you noted in a tweet shortly after protestors stormed the Capitol on Wednesday, “Today is a reminder, a painful one, that democracy is fragile.” Indeed it is. And so are nation-states.

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Evidence not clear that Trump incited Capitol destruction
by Alan Calandro

Defending President Donald Trump is not popular and I have no interest in writing this other than adherence to truth. Recognizing the truth (if we can find it, which is not always possible of course) should make us be able to come together around that and move on with a common understanding.

Opinion Securing our nuclear legacy: An open letter to President-elect Joe Biden
by Erik Assadourian

Dear President-elect Biden: As you noted in a tweet shortly after protestors stormed the Capitol on Wednesday, “Today is a reminder, a painful one, that democracy is fragile.” Indeed it is. And so are nation-states.

Opinion Last votes of George Floyd, Breonna Taylor and others
by Gary A. Franks

Finally, the election season is over. The historic elections we saw in this cycle were intriguing. The runoff elections for the U.S. Senate in Georgia put a cap on the campaign season. For many people this could be described as a COVID-19 election. I would argue that this was an election influenced by a pandemic but determined by the killing of unarmed Black people with no adequate justice for the Black community.

Opinion Not just environmental problem; Killingly plant is a great target
by Joel Gordes

In 1990, I was one of five legislators to introduce the first climate change legislation that became PA 90-219, An Act Considering Climate Change, the most popular bill of that session. Back then I considered climate change a national security issue… and I still do.

Artwork Grand guidance
by Anne:Gogh

In a world of systemic oppression aimed towards those of darker skintones – representation matters. We are more than our equity elusive environments, more than numbers in a prison and much more than victims of societal dispositions. This piece depicts a melanated young man draped in a cape ascending high above multiple forms of oppression. […]

Artwork Shea
by Anthony Valentine

Shea is a story about race and social inequalities that plague America. It is a narrative that prompts the question, “Do you know what it’s like to wake up in new skin?”

Artwork The Declaration of Human Rights
by Andres Chaparro

Through my artwork I strive to create an example of ideas that reflect my desire to raise social consciousness, and cultural awareness. Jazz music is the catalyst to all my work, and plays a major influence in each piece of work.”

Artwork ‘A thing of beauty. Destroy it forever’
by Richard DiCarlo | Derby

During times like these it’s often fun to revisit something familiar and approach things with a different slant. I have been taking some Pop culture and Art masterpieces and applying the vintage 1960’s and 70’s classic figures (Fisher Price, little people) to the make an amusing pieces. Here is my homage to Fisher -Price, Yellow […]

Twitter Feed
A Twitter List by CTMirror

Engage

  • Reflections Tickets & Sponsorships
  • Events
  • Donate
  • Newsletter Sign-Up
  • Submit to Viewpoints
  • Submit to ArtPoints
  • Economic Indicator Dashboard
  • Speaking Engagements
  • Commenting Guidelines
  • Legal Notices
  • Contact Us

About

  • About CT Mirror
  • Announcements
  • Board
  • Staff
  • Sponsors and Funders
  • Donors
  • Friends of CT Mirror
  • History
  • Financial
  • Policies
  • Strategic Plan

Opportunity

  • Advertising and Sponsorship
  • Speaking Engagements
  • Use of Photography
  • Work for Us

Go Deeper

  • Steady Habits Podcast
  • Economic Indicator Dashboard
  • Five Things

The Connecticut News Project, Inc. 1049 Asylum Avenue, Hartford, CT 06105. Phone: 860-218-6380

© Copyright 2021, The Connecticut News Project. All Rights Reserved. Website by Web Publisher PRO