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Connecticut's "Serious" Pension Deficit

Out of the 50 states, a report shows that Connecticut is among the worst in terms of fiscal health.

 

After years of underfunding, the long-term retirement costs of Connecticut’s state employees are a cause for “serious concerns,” according to a new study from the Pew Center on the States.

As of the fiscal year 2010 – the most recent year included in the study – Connecticut’s pension was only 53 percent funded, leaving a liability of $44.8 billion. The only state with a worse percentage is Rhode Island. Neighboring New York is 94 percent funded, while Massachusetts is 71 percent funded.

"Many states have not held up their end of the bargain when they should have been paying for the promises they made,” stated the full report (PDF attached).

Health care for retirees was completely unfunded, with $26.7 billion owed. The average state has funded 8 percent of its health care, yet 17 states paid for zero of amount owed.   

Recent reforms enacted since Gov. Dannel P. Malloy have not been included in the time frame of the study, such as layoffs and reductions in benefits. According to the study, Malloy reportedly proposed a pension funding plan “calling for the state retirement system to reach 90 percent funding by 2025 and full funding by 2032." 

Casey June 21, 2012 at 01:46 AM
There is no question that Malloy inherited this issue. The problem is his successor will also inherit it due to his total lack of leadership. And several successors down the road will also inherit it due to the inability of the voters in this state to chose a different path.
Milan Moravec June 21, 2012 at 02:25 AM
When University of California Berkeley senior management make poor financial decisions they increase tuition for Californians. University of California Berkeley Chancellor Robert J Birgeneau is outspoken on why elite public Cal. should ‘charge Californians much more’ tuition. Number 1 ranked Harvard is now less costly (all in costs) than Cal. UC Berkeley tuition rising faster than costs at other universities. Birgeneau’s ‘charge more’ tuition makes Cal. the most expensive American public university! Birgeneau ($450,000 salary) likes to blame the politicians, since they stopped giving him every dollar expected. The Chancellor’s ‘charge Californians more’ tuition skyrocketed fees by an average 14% per year from 2006 to 2011-12 academic years. If Birgeneau had allowed fees to rise at the same rate of inflation over the past 10 years they would still be in reach of most middle income students. Disparities in higher education defeat the promise of equality of opportunity for Californians. An unacceptable legacy for students, parents, politicians!
David Irons June 21, 2012 at 02:16 PM
Cheryl, you are right that this predates Malloy. But if I'm not mistaken, it also predates Rell and Rowland. (I'm sure someone will correct me if I am mistaken). It seems that it snowballed and each successive administration and legislature felt it was too much to tackle so the problem just kept growing. It has to stop. Now is as good a time as any. Not 20, 30 or 40 years down the road as Malloy proposes.
John Sheehan June 21, 2012 at 03:04 PM
The state pension funds have been underfunded for so long that it is not physically or fiscally possible to make up the difference in one adminiistration. Malloy is, at least, establishing a plan that will gradually bring the fund into the necessary levels to fund these pensions. Until GAAP forced entities whether priviate or public to reveal the pension liability, most businesses and government funded on a pay as you go basis with a hope that investments would keep the funds solvent. The 2008 recession ended that for the time being. That means that retirement plans are no longer easily funded by the interest on the investment funds (assumed to be 8 percent per annum). The pension funding requirements are the reason most private companies have gone from defined benefit to a defined contribution retirement plans. This requirement of revealling the pension liability of a government entinty is relatively new so government and the government unions have been slow to resolve this liability. The bill was accumulated over time and the payment of the bill (for pensions) will have to be paid over time in order to ease the burden on the local taxpayer.
David Irons June 21, 2012 at 05:28 PM
John, I agree that the shortfall has accumulated over many years and it can not be paid off in two or three years. But I see no effort by Malloy to even begin to pay for any of it during his tenure, only that it be paid off over a number of years, after he is long gone from office.

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