Two bills eliminating overtime as a factor in calculating state employee pensions failed to clear a legislative committee this week.
The committee did not act on HB 5479, which eliminates overtime in pension determinations July 1, 2018. This week marked the committee's deadline for acting on bills.
CBIA's Louise DiCocco urged passage of the bills in testimony submitted March 13 to the committee.
"Eliminating the practice of allowing overtime in calculation of a state employee's pension/retirement benefits is beneficial and long overdue in addressing Connecticut's long-term unfunded liabilities," DiCocco said.
DiCocco said growing pension and retirement liabilities contribute to the state's long-running financial woes, and that change is necessary for Connecticut to get its finances in order.
"This is not an attack on state employees," she said. “It's simply a step that must be taken."
Pension Burden Grows
More than 1,300 retired state workers draw annual pensions of $100,000 or more.
And with more than 11,000 state employees currently earning $100,000 or more in annual pay, the number of retirees with pensions of $100,000 or more will climb in the coming years.
On top of that, more than 15,000 state retirees get $50,000 or more in annual pensions.
Those are among the reasons Connecticut’s pension fund liabilities are in the billions.
Eliminating the use of overtime in pension calculations is long overdue in addressing Connecticut's long-term unfunded liabilities.
Commission co-chair Robert Patricelli told Connecticut Business Day attendees March 14 that state government "must get a better hold on spending."
"We were astonished to find out that Connecticut was one of just four states that allows collective bargaining for state employee benefits," Patricelli said.
"We need to join the other 46 states and give that responsibility to the legislature."
DiCocco notes that private-sector retirement plans generally cut overtime from pensions decades ago, and the vast majority of states and municipalities eliminated it as well.
But not Connecticut, where state government overtime spending has become an issue, not only for its impact on the operating budget but also on the state's future pension liabilities.
DiCocco noted that CBIA's 2017 Survey of Connecticut Businesses found that 91% want the state to reform its employee retirement system.
She also said the current system can lead to problems as workers try to earn as much overtime as possible in their final years before retiring.
"Not only does overtime play a significant role in the exploding costs of our pension system, it also created bad incentives for employees' work schedules," she said.
"In an effort to drive up their pensions, employees often work a significant amount of overtime in their final three years of state employment.
"Overtime pay should not be factored into final salary in state employee pensions. This is a prudent and overdue correction."