CT to pay down pension debt by $1.6 billion

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.