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.
Noticeably absent from the latest budget by House Democrats are 11 of the 12 reforms Democratic senators requested as a condition of their approval of the union concessions deal passed on July 31st. In exchange for their votes, the Senators composed a list of 12 cost-saving reforms, which included requiring a vote on every union contract, reforming arbitration laws and ending overtime in pension payment calculations after the expiration of the SEBAC agreement in 2027.
An audit of the Connecticut state employee retirement system released Thursday led to Republican House Leader Themis Klarides, R-Derby, to call for a hearing on the auditors’ findings. The report by the state auditors revealed a number of instances of wasteful spending amounting to millions in overpayments or payments in violation of state statute during the years of 2012 and 2013.
Connecticut’s unfunded pension liabilities continue to grow despite efforts to curb the growing costs to the state. In hard numbers, Connecticut’s pension liability - the money owed to future state workers - has grown from $11.8 billion in 2010 to 20.4 billion in 2016, according to a fact sheet released Thursday by the Office of Fiscal Analysis.