Len Fasano oped: Need for pension reform persists

By State Sen. Len Fasano

Op-ed as it appeared in the Stamford Advocate

When Republicans voted against the recently approved pension refinancing deal made between Gov. Dannel P. Malloy and state union leaders, we asked ourselves two very important questions:
Is this agreement fair to taxpayers?

Is it fair to state employees?

The answer to both was no.

Here’s why.

To smooth out payments and avoid a projected $6 billion payment in 2032, the agreement defers our obligations, which adds $11 billion in new costs onto future generations. Our children, and their children, will be stuck with that bill.

The agreement hurts state employees by removing more than $1 billion owed to stabilize their retirement funds over the next two years, and $11 billion owed to state employees over the next 15 years. Instead it uses those funds to balance a budget that has been decimated by Democrats to help fix their self-inflicted wounds. It still leaves our state pension system underfunded.

In addition to new costs, this deal alone does not create retirement security, stability or predictability by any means. Reducing the assumed rate of return on pension funds to 6.9 percent is a good change. But without changes to benefits, achieving the solvency projected in this plan is just not realistic. Over the last five years, the average return rate we’ve seen in Connecticut is 2.2 percent. Even going out 16 years the average return rate climbs up to only 4.7 percent — significantly lower than what this deal is based on. So what happens if we again don’t reach 6.9 percent? Our unfunded liabilities will continue to grow even with the adoption of this agreement. It will cost the state and taxpayers even more than what is projected. And without moderate changes to benefits, the pension system will remain underfunded and unstable.

All legislators have a responsibility to do what is right not only for this generation but for future generations. Pushing the state’s financial problems onto those future generations is abandoning that responsibility.
Yet that is exactly what the governor’s deal would do — all at the expense of taxpayers and state employee retirement security.

While Republicans voted against this deal, we do agree that something must to be done to address future unaffordable balloon pension payments. And we must all work together to achieve that goal. However, simply refinancing a debt to saddle Connecticut’s future with unnecessary new burdens is irresponsible. This deal does not create predictability in our budget nor does it create stability in our state. It is a deal that allows the governor and the Democrats who supported it to once again ignore the state’s fiscal problems.

There are other ways that lawmakers could have addressed this pension issue, which is what motivated me to ask the governor to hold off on this deal until lawmakers explored all options. But instead the governor made this the only option. While it may eliminate a massive payment, it adds even greater new costs and masks the bigger problems Connecticut must fix to put an end to our crushing pension problems. That is why we cannot let the approval of this deal be the end of the conversation. It’s too easy for this deal to overshadow the need for other changes. We need to keep up the pressure on the state to tackle real pension reform.

By not bringing forth alternative options for the legislature to examine to determine if there was a better solution, those who supported this deal failed our state employees, our current taxpayers and even those taxpayers not yet born. Further, what will make this deal even more damaging is if the governor decides to reopen the state’s collective bargaining agreement and fails to address these pension issues.

There are significant and meaningful changes to the state pension system that can be made to place Connecticut on the right track. For example, the state needs to consider requiring all state employees to pay a percentage into their pensions and eliminate overtime pay from pension calculations. These savings should then go back to state employees by funding pension obligations.

However, those who supported this deal threw away the opportunity to secure these changes simultaneously. Their error will be compounded if the collective bargaining agreement is reopened for other purposes and these pension issues are not addressed.
If legislators hope to meet our responsibilities to state employees without overburdening taxpayers, there’s a lot of work ahead. The governor’s deal is an $11 billion plus “solution” to fix a $6 billion problem — and people wonder why our state is in a financial mess. Republicans will continue to advocate for the changes we need.

Sen. Len Fasano is the Republican Senate President Pro Tempore. He serves the 34th Senatorial District communities of Durham, East Haven, North Haven and Wallingford.