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

Wake Robin public hearing closes

Aradev LLC’s plans to redevelop Wake Robin Inn include four 2,000-square-foot cabins, an event space, a sit-down restaurant and fast-casual counter, a spa, library, lounge, gym and seasonal pool. If approved, guest room numbers would increase from 38 to 57.

Provided

LAKEVILLE — The public hearing for the redevelopment of Wake Robin Inn is over. Salisbury Planning and Zoning Commission now has two months to make a decision.

The hearing closed on Tuesday, Sept. 9, after its seventh session.

Keep ReadingShow less
Celebrating diverse abilities at Stanton Home fundraiser

The Weavery is Stanton Home’s oldest activity space, featuring a collection of vintage and modern floor looms. It offers opportunities for building dexterity, creative expression, and social connection through fiber arts.

Provided

Stanton Home is holding its annual Harvest Roast fundraiser on Saturday, Sept. 13 in Great Barrington, an evening of farm-to-table dining, live swing music, and community connection.

For nearly 40 years, Stanton Home has supported adults with intellectual and developmental disabilities through residential programs, therapeutic services and skill-building activities.

Keep ReadingShow less
Sharon Playhouse presents staged reading of ‘Die Mommie Die!’
Charles Busch wrote and stars in ‘Die Mommie Die!’ at Sharon Playhouse.
Provided

Following the memorable benefit reading last season of Charles Busch’s Tony-nominated Broadway hit, “The Tale of the Allergist’s Wife,” the Sharon Playhouse will present a one-night-only staged reading of his riotous comic melodrama “Die Mommie Die!” on Friday, Sept. 12 at 7 p.m.

The production —a deliciously over-the-top homage to classic Hollywood mid-century thrillers — ­­continues the Playhouse’s artistic partnership with Busch, who reprises his iconic role of the glamorous yet troubled songstress Angela Arden.

Keep ReadingShow less