At first glance, the two candidates battling to succeed 20-year state Treasurer Denise L. Nappier have a lot in common.

Democrat Shawn Wooden and Republican Thad Gray largely see eye-to-eye when it comes to the state’s massive pension debt, the state’s growing reliance on borrowing to cover debt payments, and even the financial bailout for Hartford.

But when it comes to having the proper background to do the job, the candidates each say their rival is lacking.

Wooden, 49, says he has the right mix of public- and private-sector experience. A partner at Day Pitney LLP who leads the law firm’s public pension fund investment practice, Wooden also served as president of the Hartford City Council from 2012 through 2015.

But Gray says Wooden’s tenure in city government is not a positive.

Gray, 58, who lives in Salisbury, retired in August 2017 from his post as chief investment officer of the Manhattan-based Abbott Capital Management, where he spent 28 years.

Contrasting track records

"My opponent doesn't have any professional investment experience," Gray told the CT Mirror, adding this is essential for managing a pension system that holds $34 billion in assets.

Gray also asserts that Wooden was City Council president at a time when Hartford slipped dangerously close to fiscal insolvency, and saw its bond rating downgraded repeatedly. In the winter of 2017-18 the state provided a major fiscal bailout that will pay off most of the capital city's bonded debt.

"I think the facts speak for themselves," Gray said.

But Wooden counters that Gray's depiction of his track record is both inaccurate and incomplete. "Everybody talks about these issues, but I'm the only one who's been on the front lines in a financially strapped situation and had to put forth a budget," Wooden said.

Many factors — deep pockets of poverty, declining state aid, huge quantities of tax-exempt state and nonprofit property, and debt refinancing schemes executed before Wooden's tenure — contributed to Hartford's fiscal woes.

And when former Mayor Pedro Segarra's administration proposed short-changing contributions to the city's pension funds, Wooden said he and other councilors nixed the idea.

"I pushed back against the mayor on that, a mayor of my own party," he said, adding that the stakes are even larger for state government. "The next treasurer's got to play a role in fixing what I think is one of the top challenges facing the state."

Managing CT's massive pension debt

Connecticut has more pension debt, per person, than most other states.

"Budgetary stability is absolutely critical to the future of our state," Wooden said. "This is about every taxpayer in the state of Connecticut and everyone ought to care."

"My job as treasurer is to act as the state's fiscal conscience," Gray said, adding that he would use the bully pulpit far more than Nappier did to draw attention to practices that helped Connecticut amass its huge debt burden. "It doesn't matter to me if (Republican gubernatorial nominee) Bob Stefanowski or (Democratic nominee) Ned Lamont is sitting in the governor's chair.

"The problems that we have is the culture in Hartford. I want to be an agent of change in terms of that culture."

To affect that change, Gray says Connecticut must do more than contribute the actuarially recommended amount each year to its pension programs. The state also has to recognize that some other assumptions about its pension funds don't make sense, he adds.

The fiscal health of those pension funds relies — in part — on the average return the treasurer's office will make every year by investing pension proceeds. The state employees' pension program assumes investment returns will average 6.9 percent over the coming decades. The teachers' pension assumes an 8 percent return.

Gray says both of these are unrealistic and excessive.

"The treasurer has to have a benchmark that can be hit, that is attainable," he said. "This clearly is a huge issue."

Unlike some other states, Connecticut doesn't allow the treasurer to set these returns on investment assumptions, commonly referred to as "discount rates." That authority rests with the State Employees Retirement Commission and with the Teachers Retirement Board.

But Gray said the next treasurer must be ready to work with the legislature and to use the bully pulpit. And that could mean reform in this area.

Gray says although these pension boards have representatives from state government administration and from unions, they "are heavily dominated by organized labor. I think we need to have more balanced perspectives on those boards."

Wooden agrees with Gray that the discount rates need to be adjusted to more conservative levels.

But he did not express any concerns about the current make-up of these pension boards.

"Those with a great stake in the outcomes ought to have a seat," Wooden said. "Right now I'm not advocating changing that system."

The key, the Hartford Democrat says, is to have a pension investment process that is "driven by data," completely transparent and open to public scrutiny.

Gray said the treasurer's office has undergone high turnover among senior personnel, and his first term would be spent addressing those losses.

But the next step immediately afterward, he said, is to perform a long-overdue analysis of the nearly 160 investment managers and pools in which the state has invested, he said.

Why was each one hired? What investment returns have they produced? And what fees do they charge the state?

"When you've had the same person in the office for 20 years," Gray added, "you need to take a fresh look."

Reining in the state’s maxed out credit card

Besides being concerned with Connecticut’s massive pension debt, both candidates also said the state carries a hefty amount of bonded debt that ranks among the nation’s highest on a per capita basis.

The treasurer holds one of 10 seats on the State Bond Commission, which has sole authority to determine which bonding initiatives approved by the General Assembly will go forward.

“Overall I think we could be a little more thrifty as a state in terms of what we borrow,” Wooden said.

But the treasurer also must recognize, he said, that this bonding represents another key form of investment that shapes Connecticut’s economy, its communities, and its quality of life.

“Are we supporting a climate of job growth in our state?” Wooden said. “Are we having the best eduction system? Are we investing in our infrastructure? … All of these things, in my view, are critical to turning around our state’s economy.”

Gray said he also supports critical strategic investments to grow the economy, improve transportation and strengthen education.

But unless Connecticut stems annual General Obligation borrowing — G.O. bonds are the most common and are repaid with resources from the General Fund — it is on a collision course with fiscal disaster.

Borrowing to pay off borrowing

The state’s debt also has led Connecticut to rely increasingly on borrowing to pay off borrowing, a practice Gray says needs to stop.

“It’s exactly like taking out a second mortgage to pay your groceries,” Gray said. “You’re digging a hole for yourself that eventually you’re not going to be able to get out of.”

Republican legislators have charged Nappier did not object loudly enough against this practice, not wanting to target Malloy, a fellow Democrat. Nappier did recommend reforms to the legislature in 2015 that would have stopped the use of bond premiums in this fashion.

Wooden said, “It’s not an appropriate use of bond premiums” and that he wouldn’t hesitate to seek reforms.

Keith M. Phaneuf is a reporter for The Connecticut Mirror (www.ctmirror.org). Copyright 2018 © The Connecticut Mirror.

kphaneuf@ctmirror.org