There was much back-patting about pensions in the capitol yesterday, as Governor Lamont congratulated Comptroller Scanlon, who lauded Treasurer Russell, both of whom paid homage to Lamont in turn.
Why the celebration? The state employee pension fund (SERS) inched up from 52% to 55% funding of the state’s estimated future pension obligations, according to the just-released report of the pension actuaries. Only in Connecticut would a 3% improvement be a cause for popping champagne corks, especially since SERS remains the sixth worst funded pension plan of the 50 states, as Lamont admitted.
And only the blind would ignore the two biggest factors contributing to the improvement: a skyrocketing stock market which increased the value of pension assets (pretty soon, Democrats will take credit for sunny days – except when we need rain); and billions in COVID aid from Uncle Sam (which has now run out). Of course, these factors classify as great good fortune, not as the achievements of the trio of Democrats.
It must have been “opposite day” in Hartford, because the real story is that startlingly little progress has been made on pensions during Lamont’s six years in office.
With the aid of the roaring stock market, the avalanche of federal aid and a budget mechanism (the Volatility Cap) redirecting almost $6 billion of tax revenue into SERS, the progress should have been at least double what Lamont has accomplished. What happened?
What happened is that Lamont redirected those powerful financial forces into the personal bank accounts of state employees, who have received six consecutive annual pay raises which together compound to a 33% increase. Since pensions are calculated as a percent of wages, future pensions obligations have surged 26%, from $34 billion to $43 billion under Lamont. They would have increased even more, except that there was a huge retirement wave in fiscal 2022-2023, when retiring higher-paid senior employees were replaced by lower-paid entry level employees.
While the Governor, Comptroller and Treasurer celebrated the $11 billion increase in pension fund assets (mostly paper gains, not realized gains), they ignored the $9 billion increase in future pensions liabilities.
According to the latest national survey, Connecticut state employees are the second-highest paid in the 50 states. If Lamont is serious about pension progress, he will freeze state employee wages in the budget for the next biennium.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.