Free Daily Headlines :

  • COVID-19
  • Vaccine Info
  • Money
  • 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
    Vaccine Info
    Money
    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

Budget chief calls for legislature to tackle cash-starved pension system

  • by Keith M. Phaneuf
  • November 29, 2011
  • View as "Clean Read" "Exit Clean Read"

Now that state legislators have closed the largest budget deficit in Connecticut history, Gov. Dannel P. Malloy’s administration has a new challenge: Fix a state employee pension system on a collision course with fiscal collapse in about two decades.

Office of Policy and Management Secretary Benjamin Barnes, Malloy’s budget chief, presented the challenge Tuesday to the legislature’s Appropriations and Finance, Revenue and Bonding committees during OPM’s annual budget briefing. And though he didn’t propose a specific timetable to meet the challenge, it could ultimately add hundreds of millions of dollars in costs to the annual state budget.

“There is enormous work left to be done with respect to the fiscal condition of the state of Connecticut,” Barnes told lawmakers as part of his office’s Fiscal Accountability Report, an annual briefing on short- and long-term budget issues.

“State government is leaner and more efficient” as a result of the $1.6 billion concessions deal ratified in August with state employee unions, as well as other spending cuts, agency mergers and efficiencies ordered in the $20.14 billion budget adopted in June, Barnes said.

But he also noted that the governor, who took office in January, inherited a financial picture plagued with more than $71 billion in long-term debt — one of the highest burdens, per capita, of any state in the nation.

That includes: bonded debt stemming largely from school construction, roads, bridges and other capital projects; pension funds and health care benefits for retired state workers and teachers.

Among the pension funds, the program for state employees is in the worst shape.

According to the last actuarial valuation, the fund had reached a 22-year low, as of June 30, 2010.

State government had $9.35 billion in assets in the pension fund as of mid-2010, but it owes $21.1 billion. Together, these represent a funded ratio of 44.4 percent. Actuaries typically cite a ratio of 80 percent as fiscally healthy. The last time the ratio hovered close to 45 percent was in 1988.

Barnes noted that state government has failed to reach healthy funding levels in its employee pension program for most of its history.

How the problem began

Connecticut’s pension fund began as a pay-as-you-go system. For nearly four decades, state government put nothing away, and therefore gained no investment earnings, to help cover pension costs.

Annual contributions into the pension fund, which began in the early 1980s, fulfill two purposes: Meeting the “normal cost,” or saving to cover the benefits earned by workers during the year; and making up — over a 30-year schedule — for the dollars Connecticut should have saved in decades past to meet its obligations.

Another huge wrench was thrown into the fiscal works in 1995, when then-Gov. John G. Rowland and employee unions agreed to put the pension program on what amounts to a balloon mortgage schedule.

The two sides agreed to abandon a pension fund contribution schedule that required largely equal payments, with annual inflationary adjustments, over the next 30 years to eliminate the unfunded liability.

In its place they imposed a system of ever-escalating payments. Although payments were lowered in the short-term, they have been increasing dramatically since the late-1990s.

The state’s annual contribution to the pension fund, which stood at $844 million last year and tops $1 billion this year, is on pace to hit $1.5 billion in 2022, top $2 billion by 2027, and approach $4 billion by 2032, according to OPM.

“It gets spectacularly ugly,” Barnes said, adding that it’s time for the administration and legislature to search for a way to shift from the “back-weighted system” and move “toward more level funding.”

Barnes didn’t offer specific proposals Tuesday, though he made it clear that this can only be resolved over the long term.

A 2010 panel formed by then-Gov. M. Jodi Rell to propose solutions to the huge funding gaps facing retirement benefit programs ordered an analysis that concluded that the state would have had to add an extra $550 million to its annual pension contribution last fiscal year to get the pension system back on a level-funding schedule.

But Malloy’s budget chief did make it clear that he thinks there is only one solution that will solve most of the problem: dedicating money to meet the state’s responsibilities.

“The only way to solve long-term structural liabilities is to pay them off,” he said, adding that the sooner Connecticut addresses this problem, the more progress it will make. That’s because larger contributions to the pension fund will increase investment earnings, which in turn will be reinvested and produce more income for the pension system in future years.

Sen. Eileen Daily, D-Westbrook, co-chairwoman of the finance committee, said the administration made progress reducing Connecticut’s pension fund issues during the August concessions deal. The savings negotiated in that deal are being assessed by actuaries who are expected to issue a report in late December.

But Daily said most state officials who have looked honestly at the pension obligations would come to the same conclusion that Barnes did.

“I think Mr. Barnes made clear what we know: that we have to do this,” Daily said, adding that Connecticut’s benefits contract with the State Employees Bargaining Agent Coalition extends through 2022.

But Sen. Robert Kane of Watertown, ranking Republican senator on the Appropriations Committee, said Connecticut might have been able to cut its pension costs even further in 2017 — when its benefits contract with unions originally was set to expire — had Malloy not agreed to extend it five years to get other concessions.

“I’m glad to see the administration is focusing on our long-term liabilities because sooner or later we’re going to collapse under the weight of them,” Kane said. “But I think we really missed an opportunity for major structural reform.”

SEBAC had no immediate response Tuesday afternoon to Barnes’ statements.

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
Sick of ugly politics? Do something to improve them.
by Faith Ham

That collective “Phew” rising up over our fruited plain is the national sigh of relief that the ugly political season of 2020 is one for the books. Not so fast. We are officially in the Year of the Municipal Election.

Connecticut’s building trades need the Killingly energy plant project
by Joe Toner

The 30,000 men and women of the Connecticut State Building Trades unions, were shocked and gravely disappointed by the Gov. Ned Lamont's quotes, “I don’t want to build Killingly” and that the administration could “play some games there,” referring to slowing the permitting process at DEEP.

The vaccination strategy that will save the most lives
by Harry Arora

The important decision our leaders face today is how to prioritize COVID vaccination. In these columns, three weeks ago, I put forward an evidence-based argument that we should give first priority to our seniors, in descending order of age. I proposed that if we use 90% of our vaccine for seniors and 10% for frontline healthcare workers and those with serious medical conditions, we will save 200,000 lives.

Multilingual, multicultural education is a foundational imperative
by Alissa DeJonge

As the calendar has turned to 2021, we cannot help but be reminded of how incredibly intertwined and interdependent we are all across the globe. What is said or done in one geographic location has ramifications far and wide, which underscores the importance of understanding each other and our actions, not only for the harm that can be inflicted inadvertently, but for the good that can be accomplished intentionally.

AG says COVID showed Connecticut that it needs a tougher price-gouging law
by Mark Pazniokas

Connecticut's attorney general said the state's price-gouging law was no match for COVID profiteers

Support Our Work

Show your love for great stories and outstanding journalism.

$
Select One
  • Monthly
  • Yearly
  • Once
Artpoint painter
CT ViewpointsCT Artpoints
Opinion Connecticut’s building trades need the Killingly energy plant project
by Joe Toner

The 30,000 men and women of the Connecticut State Building Trades unions, were shocked and gravely disappointed by the Gov. Ned Lamont's quotes, “I don’t want to build Killingly” and that the administration could “play some games there,” referring to slowing the permitting process at DEEP.

Opinion Sick of ugly politics? Do something to improve them.
by Faith Ham

That collective “Phew” rising up over our fruited plain is the national sigh of relief that the ugly political season of 2020 is one for the books. Not so fast. We are officially in the Year of the Municipal Election.

Opinion The vaccination strategy that will save the most lives
by Harry Arora

The important decision our leaders face today is how to prioritize COVID vaccination. In these columns, three weeks ago, I put forward an evidence-based argument that we should give first priority to our seniors, in descending order of age. I proposed that if we use 90% of our vaccine for seniors and 10% for frontline healthcare workers and those with serious medical conditions, we will save 200,000 lives.

Opinion Multilingual, multicultural education is a foundational imperative
by Alissa DeJonge

As the calendar has turned to 2021, we cannot help but be reminded of how incredibly intertwined and interdependent we are all across the globe. What is said or done in one geographic location has ramifications far and wide, which underscores the importance of understanding each other and our actions, not only for the harm that can be inflicted inadvertently, but for the good that can be accomplished intentionally.

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