HARTFORD, CT — For the first time ever, Connecticut is making an additional $60 million contribution to its pension fund to help pay down some of the billions in unfunded pension liability.
“We have exceeded for the first time in Connecticut’s history, the 15% volatility cap threshold that allows us and makes it possible today as Treasurer Wooden indicated, to make a historic deposit,” Gov. Ned Lamont’s Budget Director, Melissa McCaw, said.
The volatility cap was passed in 2018. It says if revenue from parts of the personal income tax exceeds $3.19 billion it will be deposited in the Rainy Day Fund, and anything in excess of that will be used to pay down unfunded pension debt.
State Treasurer Shawn Wooden said the state will deposit $60 million in the State Employees Retirement Fund because it’s less well-funded than the Teachers’ Retirement System Fund.
“It is the combination of the strong actions by the legislators in this building, the fiscal stewardship of Gov. Lamont, the strong investment decisions by our state treasurer, as well as the aid that we received from the federal government that allowed Connecticut to be in this place today,” McCaw said.
It was a rare moment of celebration Thursday for officials.
Republican Senate Leader Len Fasano said the announcement was the direct result of the policies pushed by Republicans during the bipartisan budget of 2017.
“Republicans fought for years for policies to cap our spending and borrowing and direct more funds toward unfunded debt. The bipartisan budget crafted in 2017 implemented those policies and mandated that the treasurer make these payments today,” Fasano said in a statement.
Gov. Ned Lamont called the payment “historic.”
“No matter how dysfunctional Washington is, we have some control over our own future going forward and that makes a difference in the near term,” Gov. Ned Lamont said.
But Connecticut continues to have more debt per person than almost any other state in the country. And some may argue that $60 million isn’t a lot when compared to the tens of billions of dollars of unfunded pension liability.
“But it’s directional and that’s really important. For a state that’s done nothing but kick the can down the road and borrow and expect the next governor and the next governor to pay for it. We’re making a downpayment today.”
Lamont said this announcement means the state can borrow money at a lower interest rate because Wall Street sees that Connecticut is getting its fiscal house in order.
“A $60 million payment to the unfunded liability will yield about $5 million annually in savings over the 25-year period,” McCaw says.
Annual spending on the State Employees Retirement Fund is about 6.2% of the general fund budget.
“When you make smart, tough financial decisions that are sometimes hard to get through this building that we need to see the results of that and that’s what we’re seeing today,” Wooden says.
Connecticut is currently staring down a $2.1 billion budget deficit this fiscal year, but Lamont’s budget office is expected to propose almost $200 million in budget cuts. The rest would likely be plugged by some of the $3 billion in the Rainy Day Fund.