Kudos to the New London Day for its excellent “CT Pension Project” reporting last week on the state’s long-term liabilities for state employee and public school teacher retirement benefits.
The Day is shining a new light on one of Connecticut’s biggest challenges— “A financial time bomb” of billions in unfunded obligations. It’s something we’ve written about frequently and last year highlighted in our “Turning the Tide” report.
The Day shared again some startling facts:
- Connecticut’s long-term liabilities total $64.6 billion
- Every person in the state—yes, including infants and children—would have to fork over $12,157 each to close the $44 billion funding gap for the state’s two largest pension systems and its two retiree health benefit programs.
- Connecticut’s average state employee pension payout (now at more than $36,000 a year) is the highest in the country, but employees contribute less to their pension accounts than the national average
- State employee pension accounts are second only to Illinois in being most underfunded in the nation
Behind the Day’s facts and figures is a story of a state that has promised so much to its public employee retirees for so long that it has more than overwhelmed taxpayers’ ability to pay for it.
And state compensation and benefits packages are often well beyond what most private-sector employers in Connecticut can afford to provide their employees. What’s more, agreements have been made to lock Connecticut into those public-employee benefits commitments for the long-term.
It’s not just the mountain of debt, says CBIA economist Pete Gioia. It’s also what that debt is blocking.
“These unnecessarily costly and generous benefits result in reducing the state’s capacity to fund other services, like education and transportation,” says CBIA economist Pete Gioia, “as well as the ability to lower taxes.”
Recently some actions have been taken to defuse the time bomb. Reforms implemented by Malloy administration, as the articles note, have reduced state employee pension and healthcare liabilities.
Much more can be done, as other states and even some of the largest municipalities—such as Chicago—have accomplished. We’ve highlighted the many ideas of the Connecticut Institute for the 21st Century, and best practices of other states.
Connecticut’s financial liabilities are daunting, but there’s another aspect of the problem. As reflected in several state and national studies, a state’s fiscal condition can be a major factor shaping its economic competitiveness and climate for business.
For Connecticut’s economy to accelerate, policymakers will have to deal responsibly and effectively with this 800-pound gorilla in the room.
Our recovery from the recession has lagged most other states’ and many observers see continued slow growth for the next several years.
Addressing these challenges is the first step to turning things around, for the sake of our present and future economy, and quality of life in Connecticut.