Senate & House Republicans Urge Legislature to Pair Pension Refinancing with ReformFebruary 1, 2017
Republican Lawmakers Share Analysis of Alternative Pension System Proposals
Hartford – Senate Republican President Pro Tempore Len Fasano (R-North Haven) and House Republican Leader Themis Klarides (R-Derby) today urged fellow lawmakers to reject Governor Dannel P. Malloy’s pension funding agreement and work together to assess alternative methods to address the state’s growing pension system problems.
The Republican legislators also released data showing how additional steps can rein in the state’s unfunded pension liabilities. Both reports show how pairing pension finance changes with modifications to state employee benefits could increase the solvency of the state pension plan.
“We can all agree that Governor Malloy’s pension refinancing plan does not fix the underlying drivers of the state’s pension problems. While it would smooth out future payments and flatten out a large payment 15 years into the future, it comes at a heavy cost,” said Klarides. “The governor’s proposed agreement would increase long-term pension expenses by $11 billion and defer over $1 billion in payments over the next two years – pushing off these responsibilities onto future generations. If there is a way to approach this problem differently, to incorporate benefit reforms to stabilize the system, we owe it to the people of Connecticut to explore all options before saddling them with this astronomical expense and approving a plan that could make it even more difficult to attain the structural changes we need. Today we are sharing information about just some of the other ideas that are out there, and urging lawmakers to consider the value in instead pursuing a plan that addresses the root cause of our financial challenges.”
“If the governor’s proposal is not about pushing off payments to plug holes in a budget, if it’s not about distracting from the need for significant state employee benefit changes, why not fully examine other ideas to strengthen our efforts?” Fasano said. “If the intention is truly to identify the best way to remedy our serious pension problems, we cannot ignore the value in looking at other options. While the governor’s plan spreads out payments, that doesn’t mean the plan will make the system stable if benefits and costs are still unaffordable. If we continue to push burdens out into the future with no plan to reduce costs, we are simply repeating the actions that got us into this mess to begin with. We need to consider and understand all alternatives before moving forward with a plan that comes at such a huge cost to the future of our state. We lose nothing by withdrawing the current plan and considering these additional ideas during this legislative session. We don’t know if the governor’s proposal is the right solution just because it is the only option. If there is a chance to obtain benefit changes, the numbers we are sharing today show it’s in the state’s best interest to explore that before committing to the deal before us today.”
Information attached includes
- An analysis from the Reason Foundation modeling changes to SERS that could be added to the SEBAC agreement funding policy changes including: adopting a defined contribution retirement plan for new hires , increasing employee pension contributions to 4%, and capping cost of living adjustments to 2% – which would save state taxpayers approximately $100 million annually, saving $2.2 billion over 20 years.
- An analysis from the nonprofit Pew Charitable Trusts showing the reduction in unfunded liability that could be achieved by contributing $200 million more annually. Pew confirmed that if the $200 million is sent back into the fund it would cut 7 years off the length of the refinancing, thereby saving taxpayers billions in future payments.