Cities, Towns Struggle with Rising State Pension Plan Costs

Government-run programs seem to be the rage among progressive candidates on virtually every platform, especially health insurance and medical leave programs.

But the concept of government-run programs is not new when it comes to state employee retirement and pension plans. 

With the fiscal constraints pension liabilities have put on taxpayers, many are left questioning whether the state can effectively manage the programs already in place.

Municipalities are asking themselves that question since state Comptroller Kevin Lembo announced that local contributions to the Connecticut Municipal Employee Retirement System would increase by as much as 2.5% this year—and another 10% over the next five years. 

Over the last decade, towns have been squeezed as a result of the state’s budget and have been forced to make numerous concessions—and increase local property taxes. 

Habitual Increases

When municipalities entered into CMERS in 1947, they did not account for the habitual increases that would be forced on local taxpayers.

Some municipalities are expected to see an increase of over $20,000 this year.

Even though various local leaders have expressed an interest in altering the program, only the General Assembly can do that.

Government-run programs often operate under the Hotel California model—it’s easy to get in, but you can never leave.

Others have tried to leave the program altogether, but can only create new retirement plans for new hires if the employees currently under CMERS are withdrawn and the town funds the full cost of pension liability.

If you think this idea sounds familiar, you’re right. 

Government-run programs are often proposed to operate under the Hotel California model—it’s easy to get in, but you can never leave.

Complicated Exit

The State Partnership Plan, the state-run health insurance program for cities and towns that’s also managed by Lembo’s office, has a similarly complicated exit policy. 

Municipalities participating in the plan are locked in for three years, and will be continuously enrolled unless each individual bargaining unit in the municipality agrees to leave. 

That plan lost over $10 million in 2018, paying out $10.3 million more in claims than it collected in premiums, raising new concerns about state-run healthcare programs.

Connecticut's state-run plan for cities and towns paid out $10.3 million more in claims than it collected in premiums last year, raising new concerns about public option #healthcare proposals. https://t.co/3BMRv6XrnX

— CBIA (@CBIANews) April 5, 2019

In response to costly government-run programs such as these, many towns have resorted to hiring only part-time employees who are not eligible for the same benefits as full-time workers. 

As a pass-the-buck mentality shifts from state to local government, taxpayers will continue to bear the burden of these government-run programs.

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For more information, contact CBIA’s Michelle Rakebrand (860.244.1921) | @MRakebrand