• Connecticut's Perpetual Pension Crisis

    December 9, 2023
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    Connecticut has a Perpetual Pension Crisis.  It is a crisis of its own making and State government is responsible.  There are several reasons why Connecticut is in such a mess with its pensions.  These reasons include horrific and sometimes nonexistent returns on its pension investments, as Connecticut recently ranked next to last out of all fifty states in the country.  However, keep in mind that this crisis has been years in the making as appointed and skill-less Connecticut State Treasurers have picked pension managers with more regard to political patronage rather than their ability to invest money with greater returns, and the taint has spread to about all political actors responsible across the aisle.  As just one example, we can look back at the scandal involving former Connecticut State Treasurer Paul Silvester as an example and his subsequent prison sentence for kickbacks.  Connecticut also pays out some of the highest pensions in the country in all categories including teacher pensions, municipal pensions, and state employee pensions.  Some who are retired from the state even get their Medicare premiums reimbursed by the state.  Further, state representatives and state senators have become masterful over time in laying low to play out the clock to the pension vesting line. Viewing this myriad of ills, legendary fraudster Charles Ponzi could not design a financial mousetrap as precarious and unsure as the state pension plan of Connecticut.

    The fundamental problem with these generous pensions is that they are constantly underfunded. However, the amount of unfunded pension liabilities seems to vary.  I have written at length in the past that Connecticut has $100 to $150 billion dollars’ worth of short- and long-term debt along with unfunded liabilities.  Other estimates range that the amount of unfunded pension liabilities is from $30 to $50 billion dollars with an accepted amount being roughly $40 billion dollars.  Connecticut has seen this figure rise dramatically over the years while economically illiterate Connecticut Democrats feel that $7.7 billion dollars paid into the fund to pay down the enormous debt has gone a long way to fixing all ills.  Figures that have been thrown at the poor sucker Connecticut Taxpayers responsible for all of the debt in the state now show budget surpluses being shrunken in part to the ending of Covid-19 funds and the severe economic recession we endure caused by massive runaway inflation occurring due to the economically incoherent and ridiculous economic policies of the Democrat Biden Administration.

    I submit unto you that Connecticut has a spending problem as it cannot tax enough aspects of our personal and business lives to cover that same spending.  Budgets always come and go with a maximum increase in state spending as the almost comical "fiscal guardrails" consisting of spending caps implemented over the years kick in.  However, to work around this fictional safety net, money spent on many occasions just falls off budget and is forgotten until the time comes for Connecticut Taxpayers to pay for it through yet even higher taxes and for added items, services, and crony support. Therefore, spending cap in my observation is normally ignored.  Much more egregiously, Connecticut has a habit of spending to excess with pensions. Connecticut Taxpayers are forced to live within their means and a strict budget especially during these Democrat Party induced runaway inflation times.  However, State government fights fiscal restraint at every turn since political patronage spending is built into the state budget, followed by the continual progression of handing state jobs and nonjobs to the politically favored, thereby growing the pension deficit to new stratospheres.

    Unfortunately, little can be done to undo the commitment of past pension obligations, but there are several things Connecticut can do to make the future brighter. The biggest solution that can be afforded Connecticut's constant pension crisis is to properly fund it and hire a non-politically affiliated investment company that has proven results in their investment returns. Also, our fintech “businessman” Governor (his Royal Con-Man King Ned Lamont the Unaccountable) could call for a full real time and coherent disclosure of all pension business, so that crony dealings (such as his wife’s assets being placed into the pension via manager Hamilton Lane) can come to immediate light. Also, will we ever live to the day when we will see any one legislator have the courage to advocate for “defined contribution” Section 401(k) or 403(b) pension plans for new hires instead of the current bankrupting system?  Further, as much as there been some recent increases by new hire state employees to increase their required payments into the fund, it as a drop in a bucket. Connecticut's pension still is unfunded by roughly 50%.  Cut spending and invest pension funds wisely.  But with all of the fingers in the pie, we know this type of courage and reform will never happen in Connecticut. 

    When Connecticut Taxpayers run out of money and the state's debt escalates to the point of no return, maybe we will then hear reform is needed.  Do not count on it.  Also do not count on any politically connected individuals proposing solutions to the pension Armageddon being laid across the backs of Connecticut vassal-like taxpayers. Debt is the solution of constant omnipotent Democrat party control and power in Connecticut forever.

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    Author

    Bob Swick

    I am an Adjunct Professor of Business and Economics and have taught for 41 years for several different colleges and universities. I have a Bachelors of Science in Journalism and a Masters of Science in Economics. I have written about economics and political issues in my blog "Swick Speak" since 2006.
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    Travis R

    Stupid is as stupid does.

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