"That was the essence of the challenge -- why are we paying and things aren’t getting better?”
Jean-Pierre Aubry
Governor Dannel Malloy has rolled out more support for his fresh look at the Connecticut state pensions system, but he’s still getting pushback from some of the state's constitutional officers.
Malloy and his budget chief Ben Barnes announced recently they were seeking to change the way they’re paying down Connecticut’s massive unfunded pension liability. Now the administration has unveiled a report from the Center for Retirement Research at Boston College on the best way to tackle a growing problem.
Report author Jean-Pierre Aubry said they were brought in to solve a seeming conundrum.
"[The administration] thought it was doing all the right things," he said. "It was paying the arc and yet they were still falling behind. And that was the essence of the challenge -- why are we paying and things aren’t getting better?"
In fact, if the state stayed with its current plan to fix the problem, paying off unfunded liabilities by 2032, required contributions to both the state employees and teachers retirement funds would rise sharply in coming years, just as the state faces falling revenues. Aubry said recalculating the liability by a different formula revealed the true extent of the issue.
But he also said that most of the problem relates to pensions that weren’t funded before the 1970s, and it's unfair to saddle this generation with the whole cost of those mistakes.
“Paying legacy costs over multiple generations makes more sense than having these taxpayers specifically pay for legacy costs and letting other generations get that windfall,” Aubry said.
So the new plan proposes to spread out that liability, separating out the unfunded legacy pensions, and paying them separately, while saving less for current pensions and giving up on the idea that the whole problem can be fixed by 2032.
Connecticut’s treasurer Denise Nappier said she believes this fix is too radical — if the state backs off on saving for future pension costs now, it’ll miss out on investment income that could help out burdened tax payers.
Comptroller Kevin Lembo also won’t yet sign off on the proposed changes, saying many questions remain about both its legality and its effectiveness.