Back Home About Us Contact Us
Town Charters
Seniors
Federal Budget
Ethics
Hall of Shame
Education
Unions
Binding Arbitration
State - Budget
Local - Budget
Prevailing Wage
Jobs
Health Care
Referendum
Eminent Domain
Group Homes
Consortium
TABOR
Editorials
Tax Talk
Press Releases
Find Representatives
Web Sites
Media
CT Taxpayer Groups
 
Unions
Report: Reduce Retirement Benefits - Hartford Courant

Report: Reduce Retirement Benefits - Hartford Courant

 

January 28, 2011|By MARA LEE, maralee@courant.com, The Hartford Courant

Connecticut should reduce its retirement benefits for state employees, following the lead of other states, according to a report by a private group released Friday.

The report by the Connecticut Regional Institute for the 21st Century pegged unfunded pension and retiree medical benefits at $41.9 billion, using an estimate from the National Association of State Budget Officers.

Review the Report at … http://ctregionalinstitute.files.wordpress.com/2011/01/pensions_fullppt.pdf

 

 

Estimates vary widely. The Pew Center on the States, which did a similar roundup of how states are reducing their retirement benefits, said in November that Connecticut's liability was $34 billion.

Connecticut pays for retiree medical benefits as they're incurred, out of operating revenue, so it's unfunded by design. The state sets aside money for the future pension obligations.

The state's own accounting shows that the shortfall between pre-funding and pension obligations has grown rapidly, from $9.2 billion in June 2008 to $11.7 billion in June 2010, the most recent data available.

The new report criticizes Connecticut for not doing more to cut retiree benefits, or increase employee contributions, as other states have done. For instance, Pew reports that seven states have reduced the cost-of-living adjustments to future pensions (and one did the same to current pensions). Seven other states changed how an employee's final salary is calculated, typically stretching the average from three years to five years.

The state already requires new hires to contribute 3 percent of their pay toward their pensions, but only for the first 10 years with the state. The report's authors say that is not enough, given that Connecticut has one of the biggest shortfalls between what it has promised and what it has put aside.

According to the state comptroller's office, the average pension of the state's nearly 42,000 retirees is $30,252. There are just over 50,000 state employees who will draw pensions after retirement. Their average salary is $65,829.

Larry Dorman, spokesman for the largest union representing state workers, was not receptive to the report's recommendations. "We all acknowledge we're in an economic crisis, but that crisis was not caused by state correctional officers, or clerical workers or social workers," he said.

The report says that the state should make its compensation comparable to the private sector, which rarely offers pensions these days, instead, contributing to 401(k) plans. Alaska and Michigan no longer offer pensions to state workers, but all other states do.

The report does not explicitly say the state should stop offering pensions, but said new employees should either have a 401(k) or a hybrid plan.

"These are a series of recommendations only a Wall Street financier or a big bank or a big corporation could love," said Dorman, with the American Federation of State, County and Municipal Employees. "It is premised entirely on driving down and weakening what's left of the middle class in Connecticut."

Ads by Google

Peter Gioia, one of two steering committee members from the Connecticut Business and Industry Association, said the report does not recommend that all eight ways the state could cut pension coverage or three ways it could reduce retiree medical costs should be implemented.

"I think they should seriously consider doing more than half of them," he said.

The institute was formed in the late 1990s to give businesses input into public policy questions.

One idea is that the state should give cost-of-living increases for future retirees. That's more radical than other states' actions on COLAs.

But given that unions would have to agree to decreases, how likely are these recommendations to become reality?

"I don't know that I can answer that," said Jim Torgerson, chairman of the steering committee. "I think the state needs to sit down with the unions and talk about these things."

Torgerson, chairman of United Illuminating's parent company, said his own company stopped offering pensions for those hired since 2005, instead providing a 401(k). In that kind of arrangement, the worker shoulders the investment risk.

Current retirees can't have their pensions changed, by law, but Gioia said pension rules for current workers can and should be modified so that education, public safety and social services aren't squeezed and taxes aren't raised to pay for retiree benefits.