Pension Commission Wants More Time

Members of Connecticut’s Pension Sustainability Commission want more time to develop recommendations for addressing the state’s spiraling pension costs.
The commission met Dec. 12 and agreed to ask the incoming speaker of the state House for additional time to complete its task.

Commissioners were scheduled to provide a report next month to the General Assembly with recommendations for tackling pension costs.
The commission has considered using proceeds from the state lottery system to fund pensions, as well as transferring state assets, such as real estate, into a trust that would support state employee pension funds.
Commissioners expressed concern over what percentage of state property could actually be placed into a trust.
The commission chairman, Rep. Jonathan Steinberg (D-Westport), said it appears that only a small amount of state-owned property would be eligible.

Annual Pension Payments: $1.93 Million

Commissioner Erin Choquette, a policy and legal adviser at the state Department of Administrative Services, said the commission must determine the criteria for using state land in the trust.
“There are some very clear legal restrictions to touching a good portion of the land,” Choquette said.
“I don’t think we can vote on a final report until we resolve this,” Steinberg added.
The commission met on the same day that Comptroller Kevin Lembo launched the new OpenPension website that lists every pension the state pays.

The site reveals the state pays out $1.93 billion in annual pensions to more than 52,000 retired state employees and their surviving spouses.
The largest payment is over $322,000 to a retired University of Connecticut Health Center professor and the smallest is just $45.
Connecticut has 430 state retirees with annual pensions over $100,000 and 14 drawing pensions over $200,000.

Investment Returns

Commissioner Ted Murphy, senior vice president for Connecticut Innovations, said the commission's report must address the state's assumptions for investment return rates.
Connecticut's various state employee pension accounts have massive liabilities because lawmakers for years failed to properly fund them.
But the problem was made worse when lawmakers assumed much higher investment returns than the state was actually earning, as Treasurer Denise Nappier noted in an earlier appearance before the commission.
"If we don't reform the rate of return and how those decisions are made, we're going to be back here no matter how many assets we get," Murphy said.
Commissioner Ian McLachlan, a former Superior Court justice, agreed.
"Unless we make the changes that the treasurer and others have spoken to, this is a waste of time," he said.
Steinberg said commissioners could recommend that lawmakers seek a more realistic investment return rate but was reluctant to dictate policy to the legislature.
The commission will meet some time after Jan. 10 to address the real estate issue and create an outline for its final report.

Stress Test

Two days after the commission’s meeting, Governor Dannel Malloy issued a statement saying the State Employees Retirement System is more stable due to changes made during his administration.
He urged lawmakers to make similar changes to the Teachers Retirement System.
Malloy referenced a recent stress test The Pew Charitable Trusts performed on both SERS and TRS.
Pew noted that "recent reforms to SERS demonstrate positive results in managing financial market volatility and mitigating investment risk."

The legislature narrowly approved a number of changes in 2017 that the Malloy administration negotiated with state employee unions, including spreading SERS payments over several years and a package of limited reforms that also extended union contracts five years to 2027.
Malloy said lawmakers declined to make similar changes to the Teachers Retirement System.
Pew released a report earlier this year that shows Connecticut has the fourth worst pension fund shortfall among the 50 states, with just 41% of the assets needed to pay for promised benefits.
The only states worse are New Jersey and Kentucky, which each have 31% of pensions funded, and Illinois at 36%.

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For more information, contact CBIA's Louise DiCocco (860.244.1169) | @LouiseDiCocco