HARTFORD, CT— Gov. Ned Lamont and the coalition representing state labor unions agreed to reamortize pension debt to find about $130.7 and $140.7 million per year in budget savings.
Under the agreement, the state will also transition to a “level dollar” payment method and spread the payments over a longer period of time. There will be no change to pension benefits for state employees.
The only change is that the pension liability attributable to those pensions earned as of 1984 will be fully funded by 2047 instead of by 2032 under the current plan.
The State Employees Bargaining Agent Coalition issued a statement to their members explaining that the deal “keeps the parties’ commitment to make no change in pension benefits.”
The coalition wanted to make it clear to their members that the 2017 SEBAC deal was still what determines pension and healthcare benefits for state employees and the deal the administration announced Thursday was simply an extension of the pension payment schedule.
“SEBAC will not be part of asking for more sacrifices for state employees, who have already given so much for the people we serve,” according to the statement.
“Completing the re-amortization of the state pension fund, adjusting the schedule to pay off Connecticut’s pension debt, will help stabilize state pensions and ensure obligations to current and future retirees are fully funded; it was included in the recently passed budget along with re-amortizing the Teacher’s Retirement Fund,” the union coalition added.
The savings were already included in the budget Lamont signed into law last month, but “out of an abundance of caution, the Lamont administration will be submitting this agreement to the General Assembly for its approval because state statutes contemplate such submission if an amendment to a prior agreement has additional costs, even though in this case the near-term cost impact is to achieve savings.”
Senate Republican Leader Len Fasano, R-North Haven, complained on June 5 during the budget debate that the legislature needed to weigh in an any agreement before it was finalized. He didn’t believe a state budget was balanced and should be approved before an agreement with the unions was reached.
He was not immediately available for comment Thursday.
Moody’s Investors Services recently calculated that for 2018 Connecticut’s adjusted net pension liabilities were $62 billion, which translates to 286% of its revenues – the second-highest among all states.
The administration applauded the agreement.
“This executed agreement honors the spirit of the original agreement transitioning to a level dollar amortization while flattening the trajectory of the state’s annual employer share of our pension costs without affecting benefits for any current or future employees,” Office of Policy and Management Secretary Melissa McCaw said. “This will allow the state significantly more sustainability in budgeting, honoring our commitment while in alignment with revenue growth, which is helpful in the near term and for the decades ahead. Connecticut has faced pension problems for generations and the agreement announced today is in furtherance of the state’s commitment to a sustainable financial path while working towards a healthier and well-funded retirement system for our employees.”
Lamont added that this is a “good day” for Connecticut.
“Some may have doubted our ability to achieve the budgeted pension savings, but here we are, and I am sure even they will enthusiastically agree that today’s news positions our state on firmer financial ground well into the next decade,” Lamont said. “I refuse to take a passive approach and sit on the sidelines when faced with the need to make reasonable adjustments to address the state’s structural deficits. The pension liability we face is decades in the making and will take decades to resolve.”