The state budget will begin reaping the benefits soon of the billions of surplus dollars officials poured into Connecticut’s cash-starved pension funds.

But the savings — which are considerable — won’t be as easy to see at first glance.

When Gov. Ned Lamont and legislators begin in February to craft their next budget, required pension contributions for 2023-24 will approach $3.6 billion.

That’s $127 million, or 3.4%, less than the minimum required payments Connecticut must contribute this year.

Hardly the $300 million-to-$400 million reduction some state officials touted this past fall as Connecticut was depositing an unprecedented $4.1 billion in budget surplus into its pension programs.

Such statements spurred hope the state would be able to finance new tax cuts or expand programs with pension savings alone.

So why isn’t the year-over-year savings larger?

For one thing, more than 4,000 veteran state employees retired between January and June, more than double the total in a normal year, as they hurried out the door to avoid new limits on pension benefits that began July 1.

Any surge in retirements — in which workers stop paying into the pension fund and start drawing benefits out of it — puts strain on the system.

Also, the state refinanced both pension systems in 2019. Connecticut had under-funded its pension systems for decades before 2010 and required annual contributions were projected to spike at the end of the 2020s and early 2030s. That refinancing smoothed out those spikes, lowering costs in the worst years and increasing projected payments in the late 2030s and early 2040s.

But state officials also took some relief right away, reducing required contributions in Lamont’s first biennial budget, even though those required payments were far below the danger levels projected well down the road.

Those more recent payment reductions have to be made up, along with the potential investment earnings Connecticut forfeited by artificially lowering its contributions.

Had Connecticut’s pension programs not been under pressure from these other forces, required pension payments might be even rosier in the next budget.

For example, Connecticut must contribute slightly more than $2 billion next fiscal year into the pension for state employees. That’s $103 million less than this year’s mandatory payment. But according to a recent analysis by the state’s actuaries, Cavanaugh-Macdonald Consulting of Kennesaw, Ga., the required payment would be about $2.3 billion next fiscal year, a $153 million increase, had surplus funds not be deposited into the program.

In other words, Connecticut went from a $153 million cost increase to a $103 million reduction, a $266 million swing in the state’s favor because of the surplus deposit alone.

The same thing applies to the state’s other major pension program, the one serving municipal teachers.

Next year’s required contribution of $1.55 billion is about $24 million less than this year’s. But had the teacher’s pension not received a share of surplus dollars this fall, the mandatory contribution would be going up by about $49 million. That’s an improvement of about $72 million, according to actuaries.

And over the past decade, required pension contributions haven’t shrunk once, except in cases of refinancing.

“I think it’s the best thing … of all of the things we have done” in recent budgets, said Sen. Cathy Osten, D-Sprague, co-chairwoman of the Appropriations Committee, of the pension reforms and surplus deposits. “We were looking at a [pension] system that would have eclipsed the state budget.”

State government was struggling with annual budget deficits for much of the 2010s, despite major tax hikes in 2011 and 2015. And had legislators not charted a new course five years ago, Osten said, the threat of more deficits, taxes and program cuts loomed large.

What happened instead was a major new savings program adopted in October 2017 that was perfectly timed to take advantage of a stock market that mostly soared for the next four years.

Lawmakers specifically tied their own hands, restricting the state’s ability to spend a portion of quarterly tax returns tied to investment earnings and certain business income.

The results were roughly $9 billion in budget surpluses. About $3.3 billion resides in the largest rainy day fund in Connecticut history. Another $5.8 billion were deposited, between 2020 and 2022 — as supplemental pension contributions on top of the $3 billion-plus in annual, mandatory payments.

“The fiscal reforms enacted to combat volatility and pay down debt are working as planned,” said Comptroller Natalie Braswell, who added that they have produced “lasting impact” on state finances.

“This valuation report clearly demonstrates the progress made under Governor Lamont and his commitment to paying down our unfunded liabilities,” added Chris Collibee, spokesman for the governor’s budget office.

Collibee reaffirmed Lamont’s pledge to renew the savings program that produced these surpluses. Connecticut promised in 2018 in contractual covenants with its bond investors not to tamper with this program through June 30, 2023. The governor has said he wants to renew that commitment for at least another five years.

And last year’s surplus deposit of $4.1 billion into the pension funds may not be the last one.

Lamont’s budget office last Tuesday projected a $2.87 billion cushion for the current fiscal year, which ends June 30. That’s equal to roughly 13% of the budget’s General Fund. And the governor already has said he wants Connecticut to deposit most of this potential surplus into the pension system as well.

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