Connecticut ranks as the fifth worst state in the nation in funding pensions for its state employees, and the problem is growing worse, according to a national study to be released Thursday.
The report says the problem “is cause for serious concern” as Connecticut’s pension fund is only 62 percent funded – clearly short of the 80 percent that federal experts deem as preferred. The only states that currently fund their pensions lower than Connecticut are Illinois, Kansas, Oklahoma, and Rhode Island.
Since the state legislature and the governor have not set aside enough money through the annual budgeting process, the state’s unfunded pension liability has increased by more than $9 billion since 2000. The report states that Connecticut’s pension assets grew by 89 percent between 1999 and 2008, but the liabilities jumped even higher – by 99 percent.
The nonprofit Pew Center On The States, which authored the report, says, “Connecticut’s management of its long-term pension liability is cause for serious concern, and the state needs to improve how it handles the bill coming due for retiree health care and other benefits.”
In another disclosure, public records from the state comptroller’s office show that Connecticut has about 175 retired employees who are receiving pensions of more than $100,000 per year. Some retirees from the cash-strapped UConn Health Center are receiving pensions of more than $180,00 per year. All of those listed below have increased in recent years because of cost-of-living adjustments.
Some of the highest pensions in the state are as follows:
Dr. Jack N. Blechner, former professor at UConn Health Center; former chair, department of obstetrics and gynecology $240,099
Eleanor Henken, wife of late emeritus professor, UConn medical school $223,131
Richard F. Kochanek, former head, accounting dept., UConn business school $187,605
Harry Hartley, former president, University of Connecticut $185,587
Richard Judd, former president, Central CT State University $184,897
Dr. Eugene Sigman, former dean, UConn medical school $181,564
Dr. John R. Raye, former physician-in-chief CT Children’s Medical Center $180,950
Anthony DiBenedetto, former UConn vice president, academic affairs $180,890
Dr. Leslie Cutler, former chancellor, UConn health center $180,165
Further details on state pensions are available at the Yankee Institute For Public Policy’s web site at www.CTSunlight.org
Concerned about the state’s growing problems, Gov. M. Jodi Rell announced on the opening day of the legislative session that she is creating the “Post-Employment Benefits Commission” that will make recommendations on short-term and long-term solutions for the pension system that is underfunded by $9.3 billion. In addition, the state is on the hook for future health insurance and other retiree benefits of $24.6 billion.
“The unfunded liability is considered debt and has negative impact on the state’s position with bond rating agencies,” Rell said two weeks ago.
The new commission, which has already been created by executive order, will include representatives from the top state offices that are involved in solving the problem, including the state comptroller, treasurer, governor’s budget office, actuaries, certified public accountants, and the state employee unions coalition, known as SEBAC.
“She addressed that on the first day of the session,” said Rell’s spokeswoman, Donna Tommelleo. “That’s something she’s serious about.”
Hartley, whose pension has grown from $169,000 to more than $185,000 over the past five years, said previously that his pension – after 36 years at UConn – is “well deserved.”
http://www.courant.com/news/politics/hc-state-pensions-0218.artfeb18,0,2842427.story
Susan Urahn, the managing director for the Pew Center, said that the 50-state report showed “highly troubling” findings with total liabilities of more than $3.3 trillion for pensions and healthcare that have been promised to state workers nationwide.
The problem has gotten worse in recent years as states have postponed their contributions into pension funds. In Connecticut, then-Gov. John G. Rowland and the state legislature agreed to postpone payments into the pension fund in order to save money in the short-term and balance the budget. The problem, though, is that the savings were only temporary because the amount of money that the state workers were scheduled to receive was never decreased. The legal, contractual amounts remained the same – and thus the postponement of the payments was only a short-term fix.
The practice continued under Rell as the state deferred a payment of $100 million under an agreement with the state-employees unions.
Nationally, more than half of the 50 states had fully funded pension systems in 2000, according to the Pew report, whose release was embargoed until 12:01 a.m. today. Only eight years later, that total had dropped to only four states – New York, Florida, Wisconsin, and Washington – with 100 percent funded systems.
Connecticut ranks in a group of eight states in which at least one-third of the liability remains unfunded. Illinois ranks last at 54 percent, followed by Kansas at 59 percent. Rhode Island and Oklahoma are tied at 61 percent, and Connecticut is next at 62 percent.
“Too often, policy makers kick the can down the road,” Urahn told reporters Wednesday in a conference call. “It is important to note that this problem was not created by the current recession.”
Despite the low numbers, Urahn said that states can solve the problem – if they don’t wait until it gets even worse. First, the states could start fully funding the pension obligation each year – something that often is not done. Second, they could reduce the overall liability by reducing the benefit levels. For example, Iowa in recent years raised the amount of money that must be contributed by state employees.
“Even small changes – made today – can have a significant impact in the future,” Urahn said. “The consequences of inaction are simply too great.”
Another way to cut costs is to eliminate the pension plan for new state employees and instead enroll them in a 401 (k) – style plan that is common in the private sector. R. Nelson “Oz” Griebel, who is seeking the Republican nomination for governor, has proposed such an idea in his campaign. Griebel says he understands that there are contractual obligations for current employees, but he says the state should consider a different plan for new employees.
Two states – Alaska and Michigan – have moved toward the 401 (k) – type plan. In Minnesota, the state saved $650 million over 20 years by simply raising the retirement age by one year – from 65 to 66. That move, which was made in 1989, has proven beneficial through the decades, Urahn said Wednesday.
“If they wait, it’s going to continue to get worse,” Urahn said.