Malloy proposes overhaul of state's pension-funding plan
Hartford - Gov. Dannel P. Malloy on Monday unveiled a proposal to overhaul the state's pension-funding plan that would require larger state contributions up front but provide potential long-term savings of nearly $6 billion.
The governor's plan would scrap agreements reached in the mid-1990s between former Gov. John G. Rowland and state-employee unions.
That arrangement placed Connecticut on a back-loaded pension contribution schedule with similarities to an adjustable-rate mortgage. State government was allowed to make smaller up-front payments but was scheduled for ever-larger payments in future years, including a $4.5 billion balloon payment in 2030.
"I made it clear from the day I took office that I'm committed to ending years of bad financial practices and getting the state's fiscal house in order," Malloy said Monday.
Under the governor's plan, which requires the cooperation of the legislature and state union leaders, the state would start making additional contributions to its main pension account next fiscal year, beginning July 1. That payment, $1 billion, would be $123 million larger than the current baseline, and the following year's payment would be $429 million larger.
This strategy could eventually save the state $5.8 billion over 20 years because the additional money would be invested and growing at a projected annual rate of 8.25 percent.
The governor did not detail exactly how the state would pay for the new pension contributions, but he ruled out new taxes.
The State Employees Retirement System covers 44,051 retired state workers - not including teachers - and had a 47.9 percent ratio of assets to total liabilities as of July 1. Unfunded liabilities totaled $11 billion. The common benchmark for a healthy pension fund is an 80 percent ratio of assets to total liabilities.
Malloy's plan would increase the ratio at a faster clip than the current schedule, achieving 100 percent funding by 2031.
The governor's proposal also would eliminate what one former state official has called a "side deal" between the governor and the unions that authorized the state to make smaller annual contributions than normally would be required.
These reductions totaled $105.5 million in 2010 and have likely exceeded $1 billion since the late 1990s, according to a report by the former State Post-Employment Benefits Commission.
State union leaders on Monday applauded the governor's proposal and said they would agree to rewrite the Rowland-era pension agreements.
"This is a responsible thing to do," said Sal Luciano, executive director for Council 4 AFSCME, the largest of the 15 state employees' unions.
Stories that may interest you
The priest who presided over the funeral of Peter Frates says the best way to honor the man who helped make the ice bucket challenge a phenomenon is to imitate him
The first week of applications to open marijuana businesses in Maine has been busy
Public utilities regulators in Connecticut have asked the state's two largest electricity providers to take steps to reduce the number of winter shutoffs to households having trouble paying their bills
A Connecticut man who had shipments of cocaine mailed from Puerto Rico to addresses across the Northeast has been sentenced to more than eight years in prison