Government worker pensions should be ended gradually

Maybe the state should applaud the plan announced recently by state Comptroller Sean Scanlon and leaders in the General Assembly to restore the solvency of the Connecticut Municipal Employees Retirement System. The system is run by state government and 107 of the state’s 169 towns participate in it to some extent.

Just like the state government employee pension fund, the municipal pension fund system now is carrying large unfunded liabilities, which have risen from $332 million in 2016 to $1.3 billion today, an increase of 313% in just six years. While to be considered healthy a pension system should be at least 80% funded, in the last five years the municipal system’s funding has fallen from 92% to only 69%.

The reform plan is supposed to reverse the trend toward underfunding as well as to save money for the participating towns. But since the plan involves extending by eight years the time for properly covering the fund’s liabilities, during which inflation may persist and entitle pensioners to higher cost-of-living increases, the plan’s savings may not be as great as projected.

In any case refinancing the municipal pension system is not the pension reform Connecticut most needs. That reform is the gradual extinction of the state and municipal government employee pension systems, since they are no longer necessary to draw people to government work and since they will always be vulnerable to unfunded liabilities that can worsen for many years before they are much noticed and elected officials find the courage to address them.

Of course this doesn’t mean that government employees should go without retirement savings plans. It means that they should be paid well enough that they can finance their own retirement, as most private-sector workers do to supplement their Social Security.

As things are structured now, most government employees couldn’t care less about fairness or unfairness in Social Security or about the system’s solvency. Incorporating government employees into Social Security would bring the system enormous political support, which it badly needs.

A lesser but still shocking cause of state government’s huge unfunded pension liabilities was recently disclosed by a report from the Yale School of Management.

According to the report, Connecticut state government’s pension fund performance from 2017 to 2022 was the second worst among the states, exceeding only North Carolina’s.

The median rate of return on state pension funds in that period, according to the report, was 7.79%, while the return on Connecticut’s state pension fund was only 5.4%. The report concluded that if Connecticut’s fund had performed at the median rate, it would have gained another $5 billion.

The report attributed this underperformance in large part to the state treasurer’s practice of delegating fund management to investment firms of no special talent. The treasurer’s office should have been putting pension fund money into basic stock index funds, avoiding high management fees.

 

Chris Powell is a columnist for the Journal Inquirer in Manchester, Connecticut.  He can be reached at CPowell@JournalInquirer.com.

Latest News

Honoring the past: bearing witness at Auschwitz
Barbed wire at Birkenau.
Natalia Zukerman

Jan. 27 marked the 80th anniversary of the liberation of Auschwitz-Birkenau. I traveled to Poland as part of a delegation for the commemoration and spent a few days before the event with my father and sister learning, remembering and gathering information.

My dad’s parents, Miriam and Yehuda, of blessed memory, were deported to Auschwitz -Birkenau from the Lódz Ghetto. They both had families that perished and met each other after the camp was liberated.

Keep ReadingShow less
Dina La Fonte at Mountainside and the rise of the ‘sober curious’ movement

Dina La Fonte

Photo by Dina La Fonte

The “sober curious” movement has gained momentum in recent years, encouraging individuals to explore life without alcohol—whether for health reasons, personal growth, or simple curiosity. Dina La Fonte, a certified recovery coach, is theSenior Business Affairs Associate at Mountainside, an alcohol and drug addiction treatment center with a holistic approach to wellness that has several locations, including the one in Canaan, Connecticut. With nearly five years of sobriety, La Fonte blends professional expertise with lived experience, making her a powerful advocate for recovery.

Like many, La Fonte’s path to recovery was not just about removing alcohol; it was about rediscovering herself. “Once you get sober from a substance, whether it’s alcohol, drugs, gambling or what have you, emotional aspects of change come into place,” she explained. “It’s not a hard stop; it’s a continued process of integration and struggle.” Her own journey has led her to a career in recovery coaching, allowing her to help others find their own path.

Keep ReadingShow less
Examining Mohawk Mountain’s rich history

James Shay signed copies of his book “Mohawk Mountain Skl Area: The Birth of Snowmaking” after a talk at Hotchkiss Library of Sharon Feb. 2.

Matthew Kreta

The Hotchkiss Library of Sharon hosted local author James Shay Feb. 2 for a talk on his new book “Mohawk Mountain Ski Area: The Birth of Snowmaking.”

The book follows the life of Mohawk founder Walt Schoenknecht and his important contributions to the sport of skiing.

Keep ReadingShow less