Email not displaying correctly? View it in your browser.

Photo of Senator Paul Doyle.

STATE SENATOR

Paul Doyle

Taking Action to Stabilize the State's Pension System

Unfortunately, past administrations/legislatures from the 1930s to the early 2000s did not properly fund the state's pension fund account. As a result, today we have a funding crisis for our state's pension obligation account.

In 2011, the governor and legislature began making the appropriate and necessary contributions to the state's pension account. Today's budget deficits are due, in large part, to the foregoing state pension liabilities. Since we are now making significant pension payments, our efforts to balance our state budget are made more difficult.

Last week we took an important step by "refinancing" our state's unfunded pension liability over the next 30 years to achieve a fully funded Connecticut pension system.

The governor's agreement with the State Employees Bargaining Agent Coalition (SEBAC) was approved by the State Employee Retirement System (SERS) before gaining bipartisan approval of the budget-writing Appropriations Committee at the end of January. Thereafter, this agreement was approved by the Senate and House of Representatives.

Under the agreement:

  • The assumed rate of investment return of the pension fund will be reduced from 8 percent to 6.9 percent putting us under the national average of 7.62 percent. Although this more accurate investment rate increases the amount of our unfunded liability, this more realistic rate of return better insulates us from volatility in our unfunded liability in the future.
  • In FY 16, the state paid $300 million for costs associated with current employees and $1.2 billion in costs associated with the unfunded liability.
  • FY 18 costs for current employees will be $365 million and costs associated with the unfunded liability will be $1.282 billion.
  • Without the approved changes in this agreement, the payments would have skyrocketed, potentially hitting $6 billion by 2032.
  • The approved changes in this agreement mean that payments will level off at $2.6 billion in 2021.
  • If we had not adopted this agreement, the state's contributions to the pension fund would have increased in FY 18 by $570 million.
  • In short, the current pension crisis is very severe but our recent efforts to address it will lead to financial benefits in state budgets over the next few decades.