Cos Cobber raised the interesting question of how badly Connecticut has underfunded its pension funds and a quick survey of the web yields the hardly surprising news that we’ve got a mess on our hands.
Start with this premise regarding state employee pension funding: Ideal funding is 100%, “acceptable” is 80%.
National average of funding (almost certainly exaggerated) was 75% in 2011, down from 102% in 2000.
So how’s Connecticut measure up? Not so well.
State Employees’ pension fund funded at just 44%, State Teachers Retirement Fund, 61%. Sooner, rather than later, taxpayers will have to pay out billions of dollars in pension obligations out of current funds – there is no savings account to draw on and we don’t have our own printing press – not yet, anyway.
Even these funding percentages are woefully exaggerated because they rest on assumptions of insanely unrealistic investment returns of 8.25% and 8.5%, respectively. If the people running our state pension funds can really achieve such returns they should immediately quit Hartford and decamp to Wall Street, where they will be handed the keys to the city.
This pattern of underfunding our pension obligations (estimated at $2.4 billion, carried on the books at $2.1 billion) is hardly a new phenomenon – it’s been practiced by both parties. The most recent incident I could find in a quick Google search happened in 2010:
$100,000,000 budgeted contribution was “deferred” in 2010, under Rell, Republican. “It’s better than cutting spending”, said Dan Livingston, (Democrat) chief negotiator for the state employee’s union.
I seem to recall that current legislative session, just ended, deep-sixed Malloy’ s proposal to increase our pension fund contributions, but couldn’t find confirmation in my quick search. It really doesn’t matter, because as long as we maintain the fiction of an 8.5% return on investment and base our contributions on that fictional number we will continue to accrue an ever-growing liability that will either bankrupt us or state pensioners in the near future. Chickens do come home to roost. My vote’s for impoverishing the pensioners – they lived high on the hog for decades and it’s time they joined us ordinary folk down in the mud. That’s probably not a popular position in the Democratic Union of Connecticut.