Connecticut has the most underfunded pension system in the nation, amassing more than $127.7 billion in liabilities, according to an annual study by the American Legislative Exchange Council.
There are only a few states that generally rank lower than Connecticut in terms of fiscal stability and outlook and New Jersey is usually one of them. Like Connecticut, New Jersey is saddled with high taxes, major pension problems and fiscal mismanagement, but a new study released by the Garden State Initiative uses Connecticut’s history of raising taxes to solve those problems as a “cautionary tale."
Connecticut state employee unions threatened a lawsuit against the state if future reforms to state employee benefits are included in a bipartisan budget.
Connecticut would have to pay 35 percent of its tax revenue over 30 years in order to meet all its pension and retiree healthcare liabilities, according to a report by financial powerhouse JP Morgan. In their ARC of the Covenants 2.0 report, which examines credit risk for municipal bond holders, JP Morgan listed Connecticut as one of four states including New Jersey, Illinois and Kentucky, as having the highest retirement liabilities.
According to the new budget proposal released today, state employee fringe benefit costs - including pensions and retiree health benefits - will grow by more than $222 million. Overall, the new general fund budget will grow $214 million and a number of agencies took multi-million dollar cuts to make up for the increase in fringe benefit costs, including a $14 million cut to the Office of Early Childhood’s Care 4 Kids program.
A survey by the Connecticut Business and Industry Association shows that business owners want Connecticut to reform its state retirement benefits by a wide margin. Of the business owners surveyed, 91 percent want reforms to Connecticut’s state pension system, which includes eliminating overtime from pension calculations and moving employees into a 401(k) style defined contribution plan.