Gov. Dannel P. Malloy's proposal to boost state contributions into the pension plan for state employees is on target. By investing adequately up front the state projects saving $5.8 billion over 20 years due to a greater return on investment (though its projected 8.25 percent annual return may prove optimistic), reaching an 80 percent ratio of assets to liabilities by 2025, the industry standard for healthy pension funds.
The current assets to liabilities for the pension plan is 48 percent, one of the reasons Moody's Investors Service recently downgraded Connecticut's credit rating. Seeking short-term savings and political popularity, Republican Gov. John G. Rowland dodged tax increases in the mid-1990s by reaching a deal with state-employee unions to lower state investments in the pension system. It left pensions underfunded for years and counted on unrealistic balloon payments in later years, $3.3 billion in 2029 and $4.5 billion in 2030, about one-quarter of all current state spending.
In 2009 and again in 2010 the Democratic-controlled legislature, working under Republican Gov. M. Jodi Rell, postponed $100 million in pension payments, a total deferment of $200 million.
To fix things, Gov. Malloy proposes increasing contributions to $1.06 billion in the coming fiscal year, $125 million more than the Rowland deal called for, and to $1.3 billion the year after, a $429 million jump.
He did not say where the money will come from, only that it won't mean more tax increases. Amen. Finding the savings to boost contributions will be a big challenge. And whether subsequent administrations and legislatures will continue the required funding is questionable. But the plan is a sound one.
But it is only half the equation. To reduce state obligations, Republican state Sens. Andrew Roraback and Michael A. McLachlin propose enrolling new state employees in 401(k) plans, rather than traditional pensions, as most private companies have done, including this one. They also want to end the practice of employees padding pensions with overtime in their pre-retirement years. These are reasonable proposals.
The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Editorial Page Editor Paul Choiniere, Managing Editor Tim Cotter, Staff Writer Julia Bergman and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.
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