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June 6, 2016 Editorial

Pension fix ignored, but must not be forgotten

At the end of 2015 and start of this year several state leaders, including Gov. Dannel P. Malloy and Comptroller Kevin Lembo, offered up plans to tackle the state's billions of dollars in unfunded pension liabilities, but the issue was largely ignored during the legislative session.

Ongoing budget deficits sidetracked legislative leaders' attention, but this issue can't wait to be acted on much longer. The most recent data to raise alarm bells: Connecticut's pension debt rose to 11.3 percent of the state's overall personal income in 2013, up from 6.2 percent in 2003, according to a new analysis by The Pew Charitable Trusts.

Add in retiree health care and bonded obligations, and Connecticut's indebtedness rose to $67.5 billion in 2013, giving the state one of the worst debt burdens in the nation. Meantime, another new report from George Mason University ranked Connecticut dead last among the 50 states when it comes to overall fiscal health.

The numbers aren't all that surprising, but they help refocus the spotlight on the looming threat of rising pension costs on the state budget. A study published at the end of last year by Boston College's Center for Retirement Research found that if the state remains on its current path to funding pensions for state workers and teachers, the annual budget expenditure would explode from around $1.8 billion today (out of an approximately $20 billion spending plan) to $6 billion by 2032, a scenario that would wreak havoc on the state's finances.

The threat is so acute that both Malloy and Lembo within a few months of each other starting in November issued plans that aimed to ward off the coming fiscal tsunami.

Malloy's plan included splitting off the 31,600 most expensive retirement system members and paying their benefits over a longer period of time through an annual appropriation in the state budget. Lembo's plan included changing the amortization method so pension payments become more predictable, similar to a fixed-rate mortgage with equal payments throughout the term.

Both also proposed lowering the assumed rate of return on pension investments from 8 percent to 7 percent.

We didn't and still haven't backed either plan, but we do support Malloy's and Lembo's desires to address the issue now, rather than continue to kick the can down the road. If you think next year's projected billion-dollar deficit negatively impacts business confidence, imagine what the threat of annual pension payments going from $1.8 billion to $6 billion will do to job growth and investment in the state.

The state's long-term fiscal health was one of the concerns raised by General Electric in its decision to relocate its headquarters to Boston from Fairfield.

This should be a key issue raised during the 2016 election, in which all 187 seats in the state legislature will be up for grabs. While it may not be a sexy issue, it's incredibly important and must be tackled by legislators in conjunction with dealing with projected short-term deficits.

Now more than ever, lawmakers must prove they can walk and chew gum at the same time, by developing long-term solutions to problems that pose both short- and long-term threats.

The state's fiscal health is at stake.

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