For the second year in a row ”“ and just the second time in history ”“ excess money in the state”™s Budget Reserve Fund (BRF) will be used to pay down Connecticut”™s pension debt.
Whenever the amount in the BRF accumulates to 15% of the net general fund appropriations for the fiscal year, the excess is required to first be transferred to either the State Employees”™ Retirement Fund (SERF) or the Connecticut Teachers”™ Retirement Fund (TRF) on a not-to-exceed 5% basis.
The excess for Fiscal Year 2021”™s volatility transfer is $1.142 billion and, when combined with the estimated budget surplus of $481 million, aggregates to a projected BRF excess of $1.623 billion. Those amounts are due to Connecticut”™s continued strong fiscal policies and discipline, as well as a large tranche of Federal Covid-19 relief funding supporting the state”™s pandemic response, according to state Treasurer Shawn Wooden.
“The historic growth of the state”™s Budget Reserve Fund is a direct result of smart policy and fiscal discipline that has been practiced over the last few years,” Wooden said. “Protecting and growing our Budget Reserve Fund has led to greater liquidity, financial strength and put us in a stronger fiscal position throughout the pandemic.”
In Fiscal Year 2020, the excess BRF amount was $61.6 million; Wooden deposited that surplus into the SERF.
He said the latest move will significantly reduce both the TRF”™s and the SERF”™s unfunded liability and the state”™s Actuarial Determined Employer Contribution. Wooden added that concurrently making similar additional contributions to both the TRF and the SERF will have the greatest long-term impact on Connecticut”™s fiscal position.
The first statutory requirement is to allocate funds to either the SERF or the TRF up to a 5% maximum of unfunded liability. If the BRF excess is greater than the not-to-exceed 5% of the chosen retirement fund”™s unfunded liability, the second statutory decision is to pay down debt and/or make an additional contribution to either the SERF or the TRF.
Wooden will transfer the amount above the BRF”™s statutory 15% limit, first to the TRF in an amount approximating $903.6 million, and second to the SERF, estimated to be upwards of $720 million once the budget surplus is audited.
