Connecticut can shore up its underfunded Teachers' Retirement Fund with a $3 billion infusion form state lottery revenues and other assets, Treasurer Denise Nappier told the Pension Sustainability Commission Nov. 16.
Nappier, appearing before the commission charged with recommending ways to control the state's spiraling pension costs, said Connecticut must take several specific steps.
She proposed using lottery-backed revenue bonds to generate $1.5 billion for the fund and transferring another $1.5 billion in state assets that can be developed and appreciate in value.
The moves, she said, will lower the state's annual contribution to the fund with no negative impact on cash flow.
The state has few other options, she said.
"Years of kicking the can down the road have deteriorated the health of the fund, and the state now finds itself in the midst of another fiscal storm," Nappier, a Democrat who did not seek reelection this year, said.
“The proposal I offer is designed to put the Teachers' Retirement Fund back on firm fiscal footing, and represents a concrete, tangible plan that would strengthen long-term sustainability of the TRF while providing relief to the state and avoiding a potential spike [in annual payments]."
The commission is charged with reporting its recommendations to the 2019 General Assembly, which convenes Jan. 9.
But its chair, state Rep. Jonathan Steinberg (D-Westport) said it will be hard-pressed to meet that deadline.
Years of kicking the can down the road have deteriorated the health of the fund, and the state now finds itself in the midst of another fiscal storm.
Connecticut's unfunded liabilities—driven largely by pension and retiree healthcare obligations—exceed $80 billion and continue to undermine the state's fiscal stability and economy.
State's Spending Exceeds Revenues
A report released this week by the Pew Charitable Trusts found Connecticut is one of 10 states where spending exceeded revenues between 2003 and 2017—running deficits in 12 of those years.
The state's revenue over that period was 96.9% total spending, tied for the fourth highest shortfall with Hawaii. New Jersey has the largest shortfall at 91.3%.
"A state whose annual income falls short generally turns to a mix of reserves, debt, and deferred payments on its obligations to get by," the Pew report says.
Governor-elect Ned Lamont said he does not favor tapping Connecticut's growing reserve fund or raising taxes to address the state's forecast $4 billion, two-year budget deficit.
"There's a tendency to want to spend [the reserves] and defer the tough choices we know we have to make," he told the Connecticut Mirror.
"We need a reliably, balanced budget and not just for this year, but for the future.
"I've been pretty clear. We're not raising tax rates, period."