Unfunded State Employee Pension Liabilities Jump 93%
Connecticut’s unfunded state employee pension liabilities have almost doubled since 2011, despite recent efforts to fully fund the state’s troubled retirement system.
Pension fund liabilities hit $34.2 billion in 2018, against assets of just $13 billion—an alarming funding ratio of just 38%, one of the worst of any state.
The funding ratio has fallen from 48% in 2011 according to a fact sheet released this week by the state Office of Fiscal Analysis.
In June 2011, the pension fund had $10.1 billion in assets and $21.1 billion in liabilities—a gap of $11 billion.
But by June 2018, the fund’s liabilities ballooned by $13.7 billion while assets grew just $2.9 billion, leaving a shortfall of $21.2 billion.
Connecticut has made efforts to fully fund the pension fund in recent years, after two-plus decades of indifference.
Between 2012 and 2017, the state met 98% to 100% of its required funding contributions, while also reaching two separate agreements with state employee unions to essentially refinance its obligations.
In short, those agreements restructure pension fund payments without making any comprehensive reforms such as changes to benefits.
“Connecticut can’t just keep kicking the can down the road by restructuring pension debt and placing the burden on our children, grandchildren, and great-grandchildren,” says CBIA’s Louise DiCocco.
“The state’s fiscal problems make it increasingly difficult to find the resources to invest in education, infrastructure, and other areas that are necessary to make Connecticut truly competitive.
“Our fiscal and economic challenges are not going to go away. What Connecticut needs is meaningful pension reform to fully address this critical issue.”
Threatens Fiscal Stability
Connecticut’s underfunded state employee pensions system threatens the state’s long-term fiscal stability and economic growth.
The rate of growth of overall liabilities far exceeds state employee and government contributions and the rate of return on investments.
Annual payments to the state employee retirement system are projected to grow to $1.7 billion by 2021, an increase of almost $1 billion since 2009.
Connecticut has 50,441 state employee retirees earning an average annual pension of $38,284. About 1,400 of those retirees collect six-figure pensions.
An estimated one-third of the state’s current 49,153 employees are expected to retire within the next three years.
The Pension Sustainability Commission, created by the legislature in 2017 to develop recommendations for addressing funding issues, failed to meet a January 2019 reporting deadline.
Sweeping reform recommendations developed by the state Commission on Fiscal Stability and Economic Growth also failed to gain traction.
Those proposals included spending cuts, overhauling the tax system, and a series of pension reforms such as aligning public sector benefits with neighboring states.
“While our problems are severe, we are convinced they are fixable,” the commission noted in its November 2018 report.
“Now we need the public and private sector leadership to get the job done.”
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