Comptroller: Pension reform could save New London $28.6 million over 30 years
New London ― The city could save $951,000 next fiscal year and $28.6 million over 30 years from an agreement to reform the Connecticut Municipal Employees Retirement System, state Comptroller Sean Scanlon said Tuesday.
CMERS is the state-run pension plan for municipal public-sector employees, such as police officers, firefighters and public works employees. The comptroller’s office said the agreement, which requires legislative approval, will save the 107 participating cities and towns $32.3 million next fiscal year and more than $843 million over 31 years.
Shortly after taking office this January, Scanlon formed a working group of labor and municipal leaders to address rising CMERS costs: Employer contribution rates increased 75% over five years and the plan’s unfunded liability reached $1.1 billion. The plan is 74.2% funded, higher than the pension plans for state employees or teachers.
Scanlon explained that in 2000, the Rowland Administration and legislature changed how the cost-of-living adjustment (COLA) was structured by considering only inflation and not the performance of the fund, and skyrocketing inflation since 2021 has meant a significant COLA responsibility for towns.
Scanlon said at the group’s first meeting, everyone agreed not to do anything “unless it could be perceived as a win-win for both sides.” He announced their agreement May 3, and Mayor Michael Passero said Tuesday the comptroller “has managed to do the impossible.”
The mayor said if the reforms are approved, the city could use the $951,000 in savings for 2023-24 to fund items not included in the budget such as hiring additional police officers.
Scanlon said there hasn’t been a reform to the system since its creation in 1947, and he explained the six major changes under the agreement:
- COLA will be calculated differently and retirees will be asked to wait one year from the time they retire to collect COLA.
- The state will institute a deferred retirement option plan, which would incentivize municipal employees to work longer by giving them, upon retirement, a lump sum of what they would’ve made if they had retired earlier. Scanlon said this saves cities and towns money over the alternative of paying out money plus the COLA.
- The unfunded accrued liability will be re-amortized from 17 to 25 years, which would save municipalities $32.4 million next fiscal year. Scanlon said this is “not kicking the can down the road” but lessening the pain for municipalities and therefore taxpayers.
- As appointed by the Connecticut Conference of Municipalities, municipalities will have a seat at the table on the State Employees Retirement Commission and a say in when changes are made for the pension plan.
- The working group will stay together and try to keep making progress. Scanlon said it wants to create a new tier for new hires, maybe with a different benefit structure or higher contribution rate, so municipalities can still offer pensions but save money.
- The state would collect data from towns that aren’t in CMERS about their pension plan structure and number of enrollees. Scanlon said this could help get more towns into CMERS, which would save towns already participating more money.
Asked why this kind of reform hasn’t been done before, Scanlon commented, “Politicians are sometimes afraid to fail. I’m not afraid to fail. I’m 36 years old; I got time on my side. If this doesn’t work out, I’ll do something else with my life.”
He added that the others in the working group had the same mindset.
“The worst thing that could happen is if we don’t get an agreement and the status quo happens,” Scanlon said. “The best thing is we save $843 million for the cities and towns in Connecticut over the course of the next 30 years, and we do something nobody thought could happen.”
The comptroller said the agreement has the blessing of internal and outside actuaries, and while he’s confident the numbers are going to work, the bill has a provision to reopen the deal in five years and make changes.
The announcement of the deal earlier this month included supportive quotes from Gov. Ned Lamont, Democratic Speaker of the House Matt Ritter, Senate Republican Leader Kevin Kelly and House Republican Leader Vincent Candelora.
Scanlon said that agreement “speaks to the fact that most people think this is a good thing.” He thinks the legislature will get the changes done before its session ends in two weeks.
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