Pension Commission Hears Reform Calls
A newly formed state panel charged with bringing Connecticut’s spiraling state employee pension costs under control held its second meeting Aug. 17 at the Legislative Office Building.
Members of the Connecticut Pension Sustainability Commission previously said they are considering the possible sale of state-owned real estate and other assets to shore up underfunded pension funds.
Commission members discussed proposals to restructure the Teachers’ Retirement System and the possibility of other asset transfers.
The panel heard from the co-chairs of the Commission on Fiscal Stability and Economic Growth, James Smith and Robert Patricelli, and Jim Millstein of Millstein & Co., a financial advisory firm based in New York City and Washington D.C.
Smith, the former CEO of Webster Bank, said the teachers’ retirement system requires some restructuring “for it to be able to meet its obligations, and for the state to get back on a stronger fiscal track.”
Among the restructuring options commissioners discussed were:
- Moving retirement benefits and funding for state and municipal employees from collective bargaining to the legislature and local government upon a reopening of the state employees’ contract agreement or the expiration of the current agreement in 2027
- Requiring the state comptroller to certify that state officials are making realistic assumptions on investment return rates
- Having a private panel of experts analyze how the 2017 state employees contract agreement compares to other states and private plans, and whether it allows the state to remain competitive
While it’s no secret that Connecticut has one of the worst-funded employee pension plans in the nation, even more troubling is that the rate of growth of the overall liability far exceeds employee and employer contributions and the rate of return on investments.
Millstein highlighted how certain asset transactions could be used to shore up unfunded liabilities.
This, in turn, would not only improve the funded ratios of the pension plans, but reduce fixed costs as well, freeing up money for much-needed state investments, such as transportation.
In addition, in-kind contributions of state-owned land, buildings, and other assets the state doesn’t need to own may have valuable economic development potential.
The commission will meet again after Labor Day, and plans to meet every other week during the fall.
There is a scheduled presentation by state Treasurer Denise Nappier on the teachers’ retirement system and bond covenant issues at an upcoming meeting.
The commission must report its recommendations to the 2019 General Assembly, which convenes in January.
It’s clear that these suggested measures—including structured asset transfers and in-kind contributions—need to be applied with the development of a cohesive and long-term plan, including modification of employee benefits and higher employee contributions, to address structural deficits and Connecticut’s economic viability.
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