HARTFORD – The state of Connecticut has made significant improvements in strengthening the long-term health of the state pension funds for retired state workers, Gov. Ned Lamont announced Monday, Dec. 2.
State Comptroller Sean Scanlon and Treasurer Erick Russell highlighted the release of the annual State Employees’ Retirement System (SERS) Actuarial Valuation and Teachers’ Retirement System (TRS) valuations for fiscal year 2024. Assets in the funds grew by more than $2.7 billion and $2.6 billion, respectively, over fiscal year 2023. The funded ratio of SERS was 55.2% and 62.3% for TRS.
“For too many decades, decisions were made to not fully fund Connecticut’s pension obligations, creating disastrous results that led to years of fiscal instability,” Lamont said. “Now, for the first time in a generation, the budget decisions we have made over the last five years are having a significant impact at improving the fiscal health of our state.
“Since 2020, the budgets we enacted with the legislature allocated an additional $8.6 billion toward our pension obligations, resulting in cumulative budget savings of $730 million per year for the next 25 years.”
Scanlon added that the allocations get pension funds to 55% funded from 35% in just eight years.
“This isn’t just good news for pension holders, it’s good news for all taxpayers,” he said. “As we increase our funded ratio and pay down debt, we’ve freed up money – $492 million in the next fiscal year alone – that can support tax cuts for working families and key investments in our communities.”
The improved funded ratios are the result of a combination of strong fiscal discipline, additional contributions from excess revenue and surplus funds, and strong investment performance in recent years. Over the past decade, reforms and adjustments were put in place to lower the assumed rate of investment returns, level long-term payment schedules, and direct certain revenues to alleviate debt in the pension funds.
Budgetary controls implemented in 2017 (commonly referred to as “fiscal guardrails”), direct the state to capture certain volatile revenues and deposit them in the Budget Reserve Fund (commonly known as the “Rainy Day Fund”), along with any year-end budget surplus. When that fund reaches its legal maximum, the excess is used to pay down pension debt. These additional contributions toward pension funds in recent years have totaled more than $8.5 billion.
According to an analysis requested by Comptroller Scanlon’s office and conducted by Cavanaugh Macdonald, an independent actuarial firm, these contributions will save taxpayers an estimated $18.4 billion over the next two decades through reduced annual payment obligations. Without them, the upcoming biennial state budget lawmakers will craft early next year would require an additional $1.4 billion of funding.
State Republicans complimented Gov. Lamont on citing the “fiscal guardrails” when it comes to paying down pension fund debt.
“Republicans urge the governor to be unwavering in defense of the state’s bipartisan common sense fiscal caps,” the CT Senate Republican Caucus said in a prepared statement. “Those caps – which Republicans strenuously pushed to implement in 2017 when the state Senate was tied – are working. They have injected much-needed discipline into our government spending and borrowing.
“The governor wants an ‘honestly balanced’ budget. So do Republicans. The governor won’t support a dishonest budget which builds in future spending holes that our children will have to pay for. Republicans won’t support such a budget, either.”
