Why should any state employee earn $250,000 a year in retirement?

Gov. Dannel Malloy’s chief of staff recently received a promotion. He is now the president of the Board of Regents, which oversees Connecticut’s state universities and community colleges. 

Many will point to this as an example of old-fashioned, cynical political patronage — and they won’t be wrong — but this appointment is a case study in a far more significant problem: Connecticut’s dangerously underfunded pension system.

Mark Ojakian, the new head of the college and university system, has had a long career in state government, which began in 1980. He’s worked for the Comptroller’s Office, and followed that with a stint in Malloy’s budget office, before finally becoming Malloy’s second chief of staff. 

Ojakian earned $189,000 as the chief of staff. At that pay level, he could have retired with a pension of about $130,000 a year for life. A six-figure paycheck while working is the envy of many Connecticut residents, let alone such a generous pay package in retirement. 

But this new job is a promotion that will earn Ojakian $335,000 per year — give or take. If that figure stuns you, this next one will hurt even more. After three years on the job, Ojakian will nearly double his annual pension to more than $250,000 a year. 

In three years, Ojakian would earn $1 million in salary and the right to an additional $120,000 per year — for life. That’s on top of the $130,000 per year and top-notch health-care coverage he already banked. 

There is no public policy reason why anyone should earn $250,000 a year in retirement; that’s $20,000 a month. Pensions for retired state employees have two public policy goals. First, the state doesn’t want its retirees to outlive their savings and, second, the state wants to ensure its former employees have access to good investment options that will reduce the risk that they will outlive their savings (see point one). 

Six-figure pensions don’t accomplish either of these goals, but rather enrich a select few at everyone else’s expense.

Retirement benefits for state employees and teachers make up more than 10 percent of the state budget, and increases in their cost and other forms of employee compensation account for most of the tax increases passed into law earlier this year.

Simple alternatives include capping pension amounts at, for example, Connecticut’s median income of about $69,000. This change would affect some employees at the time of retirement. Other employees would reach the cap with their annual cost of living increases. That’s right, state employees are guaranteed raises even in retirement.

With Connecticut’s pension funds only half-funded, we are passing a large burden onto future generations. They are born with a new-car loan without the benefit of a new car. The fastest way to dump this debt is to move to another state. As long as you don’t move to New Jersey or Illinois you are better off.

This is a reality that is forcing recent college graduates out of our state — and for what? So government cronies can earn $20,000 per month in retirement. 

Connecticut has a lot of potential but until we fix policy problems like these pensions, it won’t fully realize that potential. If you’re happy with the way things are that’s fine, but don’t expect everyone else to settle, too. 

These expensive retirement benefits we provide don’t even help many of the government workers who they are meant to benefit. For example, only slightly more than half of Connecticut teachers ever get a state pension, according to an estimate by Bellwether Education Partners. These teachers don’t work as Connecticut teachers for long enough to earn any retirement benefit, instead going on to teach elsewhere or pursue another career. In addition to not getting pensions, the other half of teachers also lose out on Social Security benefits because all Connecticut teachers are exempt. This setup hurts teachers who don’t work a full career here. 

A good pension system that tries to accomplish the goals mentioned above would provide even benefits for each year of work, rather than exceptional benefits to a few. 

Connecticut taxpayers don’t want retired state employees or teachers to end up poor. That’s a rather unifying goal. Pensions of $250,000 make a mockery of it. 

Zachary Janowski writes for the Yankee Institute, Connecticut’s free-market think tank. Reach him at zach@yankeeinstitute.org.