(Cross-posted from Pelto’s Point at the New Haven Advocate)
“Unsustainable” – Has Become a Political Term of Art
Except for the phase “shared sacrifice”, the term “unsustainable” has become the most common piece of political speech in Connecticut.
Last check found over 100 news articles in which Governor Malloy has said that Connecticut’s state employee benefit and pension system is unsustainable.
Newspaper editorial writers have picked up the chant by also declaring that Connecticut’s public employee benefit and pension system is unsustainable.
The problem is that the politicians and editorial writers either don’t understand the whole situation or are purposely misleading the public on this vital issue.
It is fair to say that healthcare costs are “unsustainable” – for the state of Connecticut, for the private sector and for individuals. Getting healthcare costs under control is one of the most important issues we face as a society.
While healthcare costs are unsustainable, it is factually incorrect and intellectually dishonest to say that Connecticut’s pension system is “unsustainable”.
That is not to say that Connecticut doesn’t have a pension funding problem.
Over the past 35 years state government legally agreed and contracted with its employees to provide certain pension benefits.
However, the state failed to set aside the funds to pay for those benefits.
The problem is NOT the un-sustainability of the pension system but that Connecticut’s pension system is $9 billion dollars short of what it needs to be 100% funded.
Connecticut could do away with pensions completely for all future state employees and the state’s pension system would still require those funds.
This situation came about because Connecticut’s Tier 1 pension plan is far more generous than the Tier II system or the present Tier IIA system.
The Tier I pension plan was closed to new enrollees at the end of 1984. More than 88% of the state
employees in Tier 1 have already retired. The remainder will be retiring in the next couple of years.
As of now, governments cannot legally go back and change benefit levels for those who have already retired (or probably even for those who have vested their pension rights).
That means the state of Connecticut is “on the hook” for those Tier I commitments.
Luckily for state government, IIA pension benefits are far more limited and the long-term cost will be significantly less after the Tier I obligations are met.
So how “generous” was the Tier 1 pension?
There are over 27,000 Tier I retirees and their average pension is $33,500 a year.
The underlying issue is that an employee’s pension is based on their salary and so employees with high salaries have high pensions.
Earlier this year, the Hartford Courant reported that there were 378 retired state employees with pensions greater than $100,000 in 2010 and 24 whose pensions exceeded “the governor’s salary of $150,000.”
Although the Courant went on to report that the average state employee pension was just a fraction of that
amount, those high pension amounts have stuck in people’s minds and politicians, editorial writers and the public have all responded by demanding wholesale reform of Connecticut’s pension program without understanding that (1) Connecticut has already adopted wholesale changes to its pension system (called
Tier II and then Tier IIA) and (2) the excessive pensions are primarily a product of the higher salaries provided to selected professionals (such as doctors and lawyers), state managers and political appointees.
First, the difference between Tier I, Tier II and Tier IIA are profound.
The average annual Tier I pension is $33,500
The average annual Tier II pension is $21,900
The average annual Tier IIA pension is $11,472*
Note that Tier IIA is relatively new and there are only about 900 retirees. The average will increase but will still be below the average Tier II annual pension.
But equally important is to understand the differences within the Tier I pension system.
Tier I average annual pension: $33,500
Tier I average-managerial positions: $63,540
Tier I average-elected/appointed positions: $50,544
Tier I average-legislative staff: $36,780
And remember, there are huge differences between Tier I, Tier II and the present Tier IIA.
Take managers for example. While the average Tier I manager’s pension is $63,640, the average Tier II manager’s pension is $39,276 and the average Tier IIA manager’s pension is $18,098.
Meanwhile, compare the pension levels for managers, elected or appointed positions, and legislative staff to state of other categories of employees.
Average pension all tiers/all employees: $29,000
Average pension-Maintainers: $20,712
Average pension-Clerical: $16,548
Average pension-Correctional officer: $33,278
Average pension-Correctional supervisor: $49,572
Average pension-Social/human services: $29,232
Average pension-State Police: $49,080
Average pension-UConn Faculty: $59,256
Average pension State Auditor Office: $98,952
The state of Connecticut is facing significant fiscal challenges, but unless and until politicians and editorial writers handle the situation honestly, it is going to be impossible for the public to understand and properly engage is the debate.