Pension concessions granted by unionized state employees last year will provide just over one-third of the $4.8 billion savings projected by Gov. Dannel P. Malloy’s administration, nonpartisan legislative fiscal analysts reported Friday.

The Office of Fiscal Analysis also reported that it thinks the pension fund will gain about $3.6 billion over the next two decades — which still falls 25 percent short of the administration’s estimate. Yet only about $1.7 billion of that gain is due to the concessions, with the rest produced by a rebounding stock market.

“Investment returns are a significant factor,” OFA analysts wrote in memos Friday to the top Republicans in the House and Senate, Lawrence F. Cafero Jr. of Norwalk and John P. McKinney of Fairfield.

But Malloy’s budget chief responded that the report overestimates the role of investment gains while unfairly devaluing pension plan concessions over the long haul. Office of Policy and Management Secretary Benjamin Barnes also said that while pension savings might not match the 20-year projection, long-term salary savings stemming from higher-than-anticipated retirements could easily make up most of the difference.

“The Republicans can ask these questions any way they want, and they can use all sorts of interesting theatrics in the process, but the answer will always be the same thing: we are confident in OPM’s numbers and the calculations provided by the State’s pension plan actuary,” Barnes said.

Republican leaders in both the House and Senate asked nonpartisan staff to review the pension concessions earlier this month after a new report from pension fund actuaries showed the cash-starved benefit program had improved slightly. That report attributed the improvement both to concessions and to a recovering Wall Street — but didn’t break down the impact of either factor.

One of the biggest flaws with the administration’s $4.8 billion estimate, according to the nonpartisan analysts, is that it estimated savings for each pension change separately. The concessions deal raised regular retirement ages for several employee classes, increased penalties for early retirement, modified cost-of-living adjustments to pensions and offered a new hybrid retirement program.

The administration also was counting on these changes, most of which took effect after Oct. 1, 2011, to prompt a short-term surge in retirements.

It worked. More than 2,600 workers elected to retire from state service between January and Oct. 1, about 1,000 more than the administration expected.

But retirements drain a pension fund, since workers stop paying into the account and begin drawing benefits from it.

“A portion of the savings shortfall can be attributed to that fact that interrelated provisions were mutually exclusive,” OFA analysts wrote.

McKinney argued Friday that the administration should have known that the value of individual pension changes couldn’t be assessed separately. “One obvious assumption (for doing so) is it yields a bigger savings,” he said.

When Malloy and the State Employees Bargaining Agent Coalition first announced a tentative concessions deal on May 13, the administration estimated it would save $21.5 billion over the next two decades, including $4.8 billion from pension changes. That estimate later was upgraded to $21.7 billion. Unions ratified the concessions deal on a second vote in late August.

“This is just more bad news,” Cafero said, referring both to the new report and an OFA projection issued earlier this week that showed the current $20.14 billion state budget to be $145 million in deficit. Malloy’s administration says the budget is $1.4 million in the black.

“The legislature has to regain control over the state’s finances in the coming legislative session,” Cafero added. “We, as lawmakers, have to reclaim our responsibility to voters to rein in spending and get Connecticut back on track.”

Malloy unveiled plans last week to bolster the pension fund dramatically, with state government paying a huge price up front, but then saving big dollars in future decades.

Under the governor’s plan, state government would make an extra $3 billion in pension payments between next fiscal year and 2023. After 2024, the contribution would drop annually, and by 2031 Connecticut would be $5.8 billion ahead.

Barnes, whose office often is at odds with OFA over fiscal projections, suggested Friday that analyzing the pension fund was a job for actuaries, not budget analysts.

“While we respect the capabilities of the legislature’s Office of Fiscal Analysis, they are not actuaries; their analysis of the pension fund is flawed,” Barnes said. “The House minority should refer questions about the actuarial funding of the pension plan to actuaries. We have relied on the plan’s actuaries and we are confident in their findings, which show billions of dollars in long-term savings to taxpayers as a result of plan changes negotiated by the administration last summer.”

Barnes argued the legislative analysts’ report is “logically incorrect,” using unsustainable pension fund investment gains from the first full year after Connecticut emerged from recession.

The fund, which had its lowest point in nearly two decades on June 30, 2010, had a 21.4 percent return on investments in 2010-11 according to an actuarial valuation filed earlier this month by Cavanaugh Macdonald Consulting of Kennesaw, Ga. That return was more than two-and-a-half times the the 8.25 percent average annual return analysts use when calculating long-term projections over nearly 30 years.

About 48 percent of the pension fund’s improvement last year was due to concessions and 52 percent due to huge investment returns and other factors, according to the OFA analysis. Barnes charged that OFA maintained this ratio when projecting concession savings over 20 years, even though no one expects 21.4 percent annual returns to continue for two decades.

Barnes added that he believes pension fund savings clearly top $3 billion over the next two decades. And while the surge in retirements helped scale back the savings from the initial $4.8 billion projection, that same trend means another savings forecast from the concessions deal should be increased.

The governor’s office estimated $1.3 billion in salaries could be saved over two decades by permanently leaving vacant a portion of 1,000 anticipated retirements. Barnes said is state government maintains the staffing levels this administration is working — after retirements surged over 2,600 — it could easily double the $1.3 billion savings over 20 years.

“I feel pretty good arguing about how many billions we did save” in the pension fund, Barnes said. “It was less than we hoped, but still a strong number. And we absolutely make up most of that ground in extra PS (personal services) savings.”

“The Republican assertions of the death of state pension savings are exaggerated and incorrect,” Senate President Pro Tem Donald E. Williams Jr., D-Thompson, said. “The OFA analysis that they are touting is incomplete and they know it — as the analysis states, it is “an attempt to isolate the SEBAC Agreement savings” based on “preliminary revised” numbers. … This much is absolutely clear — there were never discussions of long-term pension savings when Republican governors negotiated with SEBAC. Today we’re talking about pension savings, and whether we save $2 billion, $3 billion, or $4 billion, Connecticut is moving in the right direction.”

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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