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.

The views expressed here are not necessarily those of The Lakeville Journal and The Journal does not support or oppose candidates for public office.

Latest News

2025 Jubilee Luncheon
   We look forward to seeing you!

Ruth Franklin discusses ‘The Many Lives of Anne Frank’ at Beth David

Ruth Franklin and Ileene Smith in conversation at Congregation Beth David in Amenia.

Natalia Zukerman

Congregation Beth David in Amenia hosted a conversation on the enduring legacy of Anne Frank, one of the 20th century’s most iconic figures. Ruth Franklin, award-winning biographer and critic, shared insights from her highly acclaimed book “The Many Lives of Anne Frank” with thought-provoking questions from Ileene Smith, Editorial Director of the Jewish Lives series. This event, held on July 23 — the date Anne Frank would have turned 96 — invited the large audience to reconsider Anne Frank not just as the young writer of a world-famous diary, but as a cultural symbol shaped by decades of representation and misrepresentation.

Franklin and Smith dove right in; Franklin reading a passage from the book that exemplified her approach to Anne’s life. She described her work as both a biography of Anne Frank and a cultural history of the diary itself, a document that has resonated across the world.

Keep ReadingShow less
Prokofiev, piano and perfection: Yuja Wang at Tanglewood

Yuja Wang performs with the TMCO and Andris Nelsons.

Hilary Scott

Sunday, July 20 was sunny and warm. Nic Mayorga, son of American concert pianist, the late Lincoln Mayorga, joined me at Tanglewood to hear Yuja Wang play Prokofiev’s Piano Concerto No. 2 in G minor, Op. 16. I first saw Wang on July 8, 2022, when she filled in for Jean-Yves Thibaudet on the opening night of Tanglewood’s summer season. She virtually blew the shed down with her powerful and dynamic playing of Liszt’s Piano Concerto No. 1.

Nic was my guest last season on July 13, when Wang wowed us with her delicate interpretation of Beethoven’s Piano Concerto No. 4. We made plans on the spot to return for her next date in Lenox.

Keep ReadingShow less