State Pension Funds Gain, But There's Still A Long Way To Go

The Hartford Courant

Connecticut taxpayers and beneficiaries of public pension funds got welcome news this past week.

Wall Street was kind to beleaguered public employee pension funds managed by the state. The funds earned a robust average of nearly 11.5 percent on their investments this fiscal year, according to state Treasurer Denise L. Nappier.

Much of the gain in market value can be attributed to Gov. Dannel P. Malloy's policy of increasing annual contributions to the funds to reduce unfunded liabilities.

The employee retirement program has been irresponsibly underfunded by past governors and legislatures, Democrats and Republicans alike. The turnaround engineered by Mr. Malloy couldn't come at a more advantageous time.

The state employees' pension fund is in the worst shape. It has enough assets to cover only 42 percent of its $23 billion in long-term obligations. The public school teachers retirement program is in somewhat better shape, covering 55 percent of its long-term liabilities. But 80 percent is considered a healthy ratio.

Mr. Malloy made state employee pension fund stability one of his highest priorities as governor. But it's tempting for governors and lawmakers — and unions — to agree to forgo the annual contribution, make extravagant promises to employees as compensation, and use the money elsewhere, especially in a tight budget.

This governor and his successors must continue the catch-up payments until a respectable percentage of liabilities can be covered, and then maintain the fund's good health.

Officials must also keep a lid on pension benefits for all public employees by getting rid of expensive baubles like allowing overtime to be part of the employees' pension formula.

Pension funds can't be brought back to health when benefits flow out faster than investment earnings and annual contributions flow in.

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