The governor and the State Employees Bargaining Agent Coalition have reached an agreement to fully fund the state’s pension obligations and the plan will go to the state General Assembly for approval.
A statement from Gov. Dannel Malloy says the state will make modifications to help avoid the “fiscal cliff the state would otherwise face in the coming years.”
The state of Connecticut has an unfunded liability of nearly $15 billion, according to the governor, and inaction could have resulted in state payments from the General Fund eclipsing $4 to $6 billion for each year in the 2030s, according to the governor.
Senate Republican Leader Len Fasano released a statement, calling the plan an incomplete bailout of a pension system that is "completely out of control."
"Simply refinancing our debt is not the structural change we need to change the direction of our state. This package will add billions of dollars in new costs onto taxpayers beyond what is reflected in the governor’s summary. It’s not a solution and taxpayers deserve better," Fasano said in a statement.
He said the state needs to not only look at how to pay past debts but also make structural changes to state benefits to get future spending under control.
Malloy’s office says the state would have had to make drastic cuts to services or unprecedented tax increases to cover the shortfall.
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“I am very grateful to SEBAC leadership that we were able to reach this much-needed and forward-looking agreement. It was incumbent upon us to reform this system before facing the fiscal crisis that could have resulted from $4 to $6-billion-dollar annual ARC payments,” Malloy said in a statement. “This agreement does not alter employee benefits or employee contributions in any way – it simply allows the state to fully fund its obligations at realistic amounts that will end with Connecticut resolving the unfunded liability and emerging with a system that is fully funded. We are holding true to the ideal of improving the financial landscape for future generations.”
The state employee retirement system was funded at 41.5 percent as of June 30, 2014. Illinois has the nation's least funded pension system at 42 percent.
