Candelora Urges Legislature to Pare Pension Refinancing with Reform
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Hartford – On Wednesday, February 1, State Representative Vincent Candelora urged fellow lawmakers to reject Governor Dannel P. Malloy’s pension funding agreement and instead urged the legislature to assess alternative means by which to address the state’s growing pension system problems.
House Republicans released data obtained from two actuarial analyses that show how additional steps can rein in the state’s unfunded pension liabilities. Both reports show how pairing pension finance changes with modifications to state employee benefits could increase the solvency of the state pension plan.
The governor’s pension proposal sought to tackle a mounting budget deficit by reducing short-term state pension contributions. In exchange for leveling payments through 2047, taxpayers would be responsible for an additional $11 billion over the duration of the deal compared to the structure of the current plan. Furthermore, the deal recommends a reduction in the investment rate of return from the current eight percent to 6.9 percent.
“Ten years ago when I started getting involved in the budget-writing process, we had much greater budget deficits, and we did some things to get us through the budget emergency – that budget hit us like a cold bucket of water,” said Candelora. “Year over year, we are faced with a short-term solution to a long-term problem. We have seen 10 years of short-term solutions to long-term problems, and I can’t stand by this vote because it does not address our state’s problems.”
Many Republican lawmakers have suggested that making alterations to state employee pension benefits could reduce the unfunded liability by $200 million. If that sum were sent into the pension fund, actuaries estimate that the length of the new plan could be reduced by seven years and could decrease the additional liability from the projected $11 billion to $3 billion.
“We have an opportunity here to have a more in-depth dialogue with the unions in an attempt to fix our budget crisis. With this proposal, we are essentially giving everyone a pass except for the taxpayers. I don’t believe that our administration negotiated this agreement with our taxpayers and children in mind; they negotiated this agreement for the short-term solution of providing a balanced budget in the next two years – that’s all this agreement does. I don’t want to leave Connecticut with a huge deficit to pay off in the future and that is why I voted no,” said Candelora.
Information released includes:
- An analysis from actuaries at the Reason Foundation modeling changes to SERS that could be added to the SEBAC agreement funding policy changes including: adopting a defined contribution retirement plan for new hires , increasing employee pension contributions to 4%, and capping cost of living adjustments to 2% - which would save the state approximately $100 million annually.
- An analysis from actuaries at the nonprofit Pew Charitable Trusts showing the reduction in unfunded liability that could be achieved with $200 million in state employee pension benefit changes. Pew confirmed that if the $200 million is sent back into the fund it would cut 7 years off the length of the refinancing, thereby saving taxpayers billions in future payments.