Malloy, Pension, State Debt, Wyman Malloy, State Debt, State Employee Pension, Wyman
The Wait, What? Blog was created in January 2011. Since then, 2,340 articles have been posted to the site. In turn, the commentary pieces have generated well in excess of $2 million hits.
One of the most constant refrains has been the problems and dangers associated with the excess debt that is dragging Connecticut down and the irresponsible failure of the state’s elected officials – both Democrat and Republican – to deal with that mounting crisis
Initial posts to Wait What? included More on the issues underling Connecticut’s State Employee Pension System (1/25/11) and Connecticut’s state pension fund in its worst shape since the state began saving for pension obligations in the mid-1980s. (2/1/11).
Over the years came additional posts such as;
Look-Out – He’s got our credit card and he is going nuts! (3/24/15)
WARNING! WARNING! The state of Connecticut’s Fiscal Health (11/18/14)
Malloy’s “NO TAX” pledge will send Connecticut into the abyss (5/6/14)
The State Budget Gimmick to End all Budget Gimmicks (12/1/14)
Is that your credit card? Why yes, yes it is…. (9/26/13)
Connecticut: The Republic of Debt (6/19/13)
And many, many more….
The effort to alert, warn and educate citizens about the fact that elected officials are failing to address Connecticut’s extraordinary debt crisis highlights the words of Jonathan Kozel, the great public education advocate and award winning author, who once wrote;
“Now, I don’t expect what I write to change things. I think I write now simply as a witness. This is how it is. This is what we have done. This is what we have permitted.” – Jonathan Kozol
And as if to prove the point, the debt crisis has gotten even worse thanks to the actions and inactions of Governor Dannel Malloy, Lt. Governor Nancy Wyman and the Democratic controlled Generally Assembly.
As if to drive the point home, today’s CT Newsjunkie headline reads, Pew: Connecticut Has One of Highest Public Debt to Personal Income Ratios. The story reports;
Connecticut has one of the highest ratios of debt to personal income and the fifth highest ratio of state retiree health care liabilities to income, according to a Pew Charitable Trusts report released Tuesday.
The report, which measured each state’s pension, health care and debt costs as a percentage of personal income, put Connecticut’s total liabilities at $67.5 billion dollars or 30 percent of personal income.
The ratio of public debt to private income is 8.8 percent, which ties Connecticut with Massachusetts for the second highest rate of public debt. When pension, healthcare and public debt are totaled, Connecticut has the fifth highest rate of unfunded liabilities.
Connecticut’s pension woes are well documented. The state’s pension obligations are about 40 percent funded, according to the 2015 actuarial valuation of the fund. Only 7 other states have a higher rate of unfunded liabilities.
Courtesy of CT Newsjunkie
While the information is hardly new, it remains extremely newsworthy.
It is newsworthy, in part, because Connecticut’s politicians are making things worse, not better and because many of them won’t even tell the truth about the crisis.
Take for example, the notorious failure to properly fund Connecticut’s pension obligations.
The new technique for ducking responsibility is to talk about “structural change,” as if we could just pass a law to reduce the problem with unfunded pension obligations.
The fact is that a state employee hired today is placed in what is called Tier III of the Connecticut State Pension System.
Tier IIA was already the least generous pension in New England, Tier III provides is even stingier.
The real reason Connecticut owes so much money to its Pension Fund is that, for the past four decades, the state has FAILED to make the necessary payments into the fund and has even raided the fund to pay for annual budget expenses.
As the CT Mirror’s Keith Phaneuf has written over and over again, and the CT Newsjunkie explains today;
The state will have to pay more than $1.5 billion into the pension fund this year to meet the annually required contribution, of which $1.2 billion represents unfunded liability or an amortization payment toward past unfunded liability. An estimated 82 percent of that payment represents the payment for unfunded liabilities. The normal annual cost of pension benefits is less than $300 million.
Had Connecticut been making its payments all along, there wouldn’t be a pension fund problem.
If Connecticut had been funding the Pension Fund correctly, the state would now have about $1 billion available to preserve vital services and begin the process of providing adequate funding to Connecticut’s public schools, and thereby reducing the unfair property tax burden the is helping to crush the Middle Class.
Instead, scarce taxpayer money is going to address the excess debt — and still the debt grows.
Over the four decades, Connecticut has had 3 Democratic governors, 2 Republican governors and an Independent/Republican governor. Not one of them was willing to do the right thing.
A recent public opinion poll listed Dannel Malloy as the 2nd least popular governor in United States.
Malloy’s response was that his “numbers were low” because he was making the tough choices and doing the right thing.
But of course, nothing could be further from the truth.
Malloy’s legacy is not about doing the right thing.
Among Malloy’s list of failures is his refusal to properly address Connecticut’s long term debt.
You can read the important CT Newsjunkie story at: http://www.ctnewsjunkie.com/archives/entry/pew_connecticut_has_one_of_highest_public_debt_to_personal_income_ratios/
Denise Nappier, Malloy, Pension, State Budget, State Employees Denise Nappier, Malloy, State Budget, State Employee Pension
Connecticut’s State Treasurer Denise Nappier deserves significant praise for stepping forward and having the courage and conviction to speak the truth about the legitimate concerns surrounding Governor Dannel Malloy’s proposal to fundamentally change the way Connecticut funds is massively underfunded State’s Employee Pension Fund.
Just three years ago, Malloy called on Connecticut to aggressively resolve the state’s historic unwillingness to properly fund its State Employee Pension Fund (See January 2012 Wait, What? post Malloy Takes Bold Step – Proposes Paying for State Pension Fund the Right Way.)
However, Malloy recently reversed his previous position and rather than focusing on making the State Employee Pension Fund more financially sounds, Malloy proposed shifting a significant portion of the shortfall onto the backs of our children and grandchildren. More
Malloy, Pension, State Budget, State Debt, State Deficit, State Employees Malloy, State Budget, State Debt, State Deficit, State Employee Pension, State Employees
The voters of Connecticut need to pay special attention to Governor Dannel Malloy’s irresponsible proposal to change the way that Connecticut funds its pension program for state employees.
Governor Malloy’s plan is nothing more than an outrageous maneuver to balance his failed state budgets on the backs of our children and their future. As the title of yesterday’s Wait, What? blog stated – Connecticut: BEWARE of Governor Malloy’s most fiscally irresponsible budget proposal yet.
The CT Mirror’s Keith Phaneuf provides more information about Malloy’s proposals in his latest article, explaining that the new initiative violates one of the most fundamental promises Dannel Malloy made when he was running for governor in 2010.
Keith Phaneuf writes,
“One year after taking office, Gov. Dannel P. Malloy vowed to accelerate payments into the state’s cash-starved pension fund, much as a family might make extra mortgage payments now to lessen balloon payments looming in future years.”
But not surprisingly, although Malloy pushed through significant tax increases in 2011 and 2015, he used the additional funds to pay for other things and never followed through on his commitment to make those extra pension payments.
Now, in the face of new state budget problems, Malloy is completely reversing his stand on properly funding Connecticut’s State pension fund and proposing “kicking the can” down the road by pushing off $8 billion in necessary pension payments onto the next generation of Connecticut taxpayers.
“Under the governor’s plan, Connecticut still would catch up on its pension contributions — after 2032.”
But as the CT Mirror reports, the Governor who seems unable to tell the truth denied reality, once again, claiming,
“We are not kicking anything down the road,” Malloy said, citing a phrase he and other gubernatorial candidates used in 2010 to describe the fiscal gimmicks that had weakened the pension system and created a record-setting state budget deficit at that time.
“It is simply irresponsible to leave more and more debt for future generations.” Malloy wrote in his 2010 campaign platform on “Taxes & The Budget.”
The governor insisted this week that it would be irresponsible to pretend state finances, and taxpayers, could afford a $6 billion-plus pension expense down the road.
Postponing some pension payments until later to avoid that fiscal iceberg is the best option, Malloy said, adding that his new plan would “smooth out” the late-term costs.”
However, the truth is that the real spike in the amount of money needed to meet the required pension payments – the real “iceberg” Malloy is referencing – does not occur this year, or next year or even the year after that.
The harsh reality is that Governor Malloy isn’t offering up this new pension funding plan because he is worried about whether the state can make its required pension payments in 2025, he is doing it NOW because he wants to use the money that we should be paying into the pension fund over the next few years to balance the state budgets during his remaining time in office.
This is not an issue of Democrats versus Republicans or Liberals versus Conservatives. Nor is it a debate about whether there should be addition changes to Connecticut’s state employee pension program.
This debate is about whether Connecticut will fulfill its financial obligations to the state pension fund or allow Dannel Malloy to divert that money to balance his state budgets and reduce the need for additional tax increases or budget cuts.
There will always be politicians like Dan Malloy who would rather dump problems on someone else rather than actually tackling the job of developing fair and honest balanced budgets.
That said, what is not be acceptable is allowing Malloy to resolve the mess he created by dumping the problem on our children.
Malloy, Pension, State Budget, State Debt, State Deficit Malloy, State Budget, State Deficit, State Employee Pension, State Pension
“Gov. Dannel P. Malloy outlined Wednesday a sweeping plan to overhaul state government’s pension system.” – CT Mirror 10-29-2015
Governor Dannel Malloy’s state budget, that took effect last July 1, is already a quarter of a billion dollars in deficit and the problem is actually far worse.
Next year’s state budget is even more out of balance and after the next election, when legislators reconvene in January 2017, Connecticut will be facing a two-year General Fund Budget Deficit of $1.6 Billion … YES, A DEFICIT OF $1.6 BILLION … [A deficit of at least $927 million in FY 2018 and $831 million in FY 2019.]
In order to address that problem, Governor Dannel Malloy is proposing to dramatically change the way Connecticut funds its state employee pension system.
The maneuver is intended to reduce the amount of money the State of Connecticut puts into its pension fund in the short-term – thereby reducing the hole in Malloy’s state budget.
However, by failing to make the required pension payments in the years to come, Malloy’s plan would shift as much as $10 billion dollars onto the backs of our children.
If Malloy’s plan is adopted, the additional spending would start in 2033. While it seems years away, the fact is that a child born today will turn 17 in 2033. Connecticut, like the United States, has already taken on too much debt. Making the required pension payments as we go forward will not be easy, but shifting the burden to our children and their future is even worse.
Malloy’s proposal is complex and thus will get limited media coverage, or worse, no coverage at all.
Today the Stamford Advocate published an editorial entitled, Malloy initiative on taxes and payroll a good one. While complementing Malloy and his budget director, the editorial didn’t even mention Malloy’s pension proposal even though the impact of his plan will be significantly greater than his proposal to cut taxes for GE and reduce the number of state employees.
The lack of reporting is no excuse for not following the issue and demanding that legislators act appropriately.
All voters should start by reading Keith Phaneuf’s article, Malloy calls for big change in pension financing, in yesterday’s CT Mirror and then continue to monitor his coverage and the articles written by other reporters at the State Capitol.
When making the announcement yesterday, Malloy called his plan a “bold move.”
Connecticut’s elected officials, including Governors O’Neill, Weicker, Rowland, Rell and Malloy have all failed to properly fund Connecticut’s pension programs, but there is absolutely nothing bold about simply shifting the burden to the next generation.
Connecticut voters across the political spectrum should take note. Whether liberal, conservative or moderate, whether Democrat, Republican or other, Malloy’s pension plan will dramatically impact Connecticut Government and the rate of taxes and spending.
Many of those who will be most impacted by the pension plan are only children. Others have yet to be born.
Do not let our elected officials make this decision in vacuum.
Learn the facts and speak out.
As noted in yesterday’s Wait, What? post – Fiscal responsibility does not begin with running away from our obligations!
Malloy, New London, Paul Vallas, Pension, Retired Teachers, Stefan Pryor, Steven Adamowski, Windham Malloy, New London, Pension, Retired Teachers, Stefan Pryor, Steven Adamowski, Windham
On August 29, 2013, “Special Master” Steven Adamowski was completing his second year under a $225,000 no-bid contract that the Malloy Administration had run through the State Education Resource Center.
The next day, August 30, 2013, “Special Master” Steven Adamowski was a Connecticut state employee, holding the title of Durational Project Manager.
Same duties, different employer.
Steven Adamowski is so “special” that the Malloy/Pryor Operation didn’t even bother to post the position or follow any type of competitive or open hiring process.
The words Steven Adamowski and Special seem to go hand in hand.
Although only certified teachers are allowed to participate in the State Teachers Retirement System, a loophole in the state statutes will allow Steven Adamowski, who IS NOT CERTIFIED to teach or certified be a school administrator; to use his new job in the Malloy administration to add years to his Teachers Retirement pension.
Alternatively, Adamowski can use his new state position to guarantee himself full retired state employee health benefits assuming he works for the state for five years.
As retired school teachers and administrators know, Connecticut’s teacher retirement health insurance program is limited and getting more and more expensive.
While retired state employees receive more substantial and less-expensive health insurance, retired teachers are facing higher and higher premiums. Some retired teachers are coming face to face with the reality that they simply can’t afford even the more limited health insurance package that is available to them.
But thanks to Governor Malloy and Commissioner Stefan Pryor, Steven Adamowski will not only collect a pension from the Teachers Retirement System, but if he continues to play his cards right he’ll get to retire with the state’s retired state employee health plan that could be worth $20,000 or more a year…..for life.
But as noted above, Steven Adamowski is used to special treatment.
- On the last day of the Connecticut General Assembly’s 2007 legislative session an amendment was added to a bill that allowed Steven Adamowski to serve as Hartford’s superintendent of schools despite the fact that he did not have the certification to be a superintendent in Connecticut. He held that position for five years. The only other person to benefit from that section of the Connecticut state statutes is none-other-than Paul Vallas (although they had to change the statute to try to fit his particular circumstances).
- Then, speaking of special treatment, in 2012, when Governor Malloy introduced his “Education Reform” legislation, Section 32 of Malloy’s bill sought to retroactively give Steven Adamowski Teacher Retirement pension credits for his time as Hartford’s superintendent. Following widespread publicity about the end-run to boost Adamowski’s pension, the legislature removed the special language.
- Meanwhile, it was about the same time that Adamowski got his no-bid, $225,000 plus benefits contract to serve as “Special Master” of Windham. His role was later expanded to serve as “Special Master” for both Windham and New London.
- The contract to serve as “Special Master,” included language that tried to allow him to tap into the Teacher Retirement System for his time as “Special Master,” but he was once again blocked from adding years due to his lack of teacher certification.
But now, thanks to the decision to make him a state employee, Adamowski is back in the driver’s seat, where is able to add years to his Teachers Retirement Pension or go for the more generous health benefits.
Whether you call him a Friend of Dan (FOD) or a Friend of Stefan (FOS) there is simply no question that Steven Adamowski is special!
Malloy, Pension, Stefan Pryor, Steven Adamowski Malloy, Pension, Stefan Pryor, Steven Adamoski, Unfunded Liabiilities
Governor Malloy and his Commissioner of Education have figured out a way to circumvent the Connecticut General Assembly and push up Special Master Steven Adamowski’s pension.
As a result of a 2006 change in the Connecticut State Statutes, Steven Adamowski was able to serve for five years as the uncertified superintendent of schools in Hartford, Connecticut. However, as a result of a separate statute that limits participation in the Connecticut Teachers Retirement System to those who hold valid teaching or administrative certificates, Adamowski couldn’t add those years to the number of years he had collected when he served as a Connecticut teacher and administrator much earlier in this career.
So last year, hidden deep inside of Governor Malloy’s education reform bill was a change to the law that would have retroactively added those five years to Adamowski’s pension. The move would have added tens of thousands to Adamowski’s pension since his salary was now in excess of two hundred thousand dollars. But after the story appeared in Wait, What? the Courant and other media outlets, the legislators deleted the “Adamowski provision” from the new law and Adamowski lost his gift of five extra years added to his public pension.
That said, the effort to boost Adamowski’s pension resurfaced when Adamowski was given a $225,000, plus benefits, no-bid contract through the State Education Resource Center (SERC). Adamowski’s contract included language that read , “Also, Dr. Adamowski will be eligible to continue membership in the Connecticut Teachers’ Retirement System.”
However, that attempt to boost his pension also fizzled when it was realized that while state law does allow the staff of the State Education Resource Center to be part of the State Teachers Retirement System only but only if they are “employed in a professional capacity while possessing a certificate or permit issued by the State Board of Education.”
Since Adamowski is not certified and doesn’t have a valid teacher or administrator certificate, he could not add the time he worked at SERC as Windham and New London’s “Special Master.”
But then last week, out of the blue, Commissioner Pryor announced that with the State Board of Education’s approval, Steven Adamowski would no longer be working through SERC but would, instead, become a state employee.
Pryor never posted the new state position. He failed to go through any recruitment or review process. He simply announced that he was giving Steven Adamowski a senior management position in the state agency. at a cost of $163,000.
Pryor did make a point of mentioning that Adamowski would be taking a $63,000 pay cut.
As the Courant reported at the time, Kelly Donnelly, Commissioner Pryor’s spokeswoman explained that, “the cut in pay brought Adamowski’s salary in line with that of other top-level salaries in the state agency.”
And Adamowski sent an email to the Courant saying that the cut was “something I can live with.”
Adamowski also reported that he had agreed to carry on his work, “due to my commitment to the schoolchildren of Windham and New London who need better schools and to the unfinished nature of the turnaround work in both Districts.”
At the same time, Adamowski told the New London Day that he accepted the move from being a SERC employee to being a state employee because, “The SERC salary was not realistic.”
But as Wait, What? readers from the coverage posted here, there were just too many unresolved questions to make the Pryor/Adamowski story believable.
The primary and nagging question was why would Adamowski move from a job that paid $225,000 plus state-employee like benefits to a job that paid $163,000 plus state employee benefits unless there was some other piece to the puzzle.
Of course, the reasonable assumption was that it had to be a last-ditch attempt to boost Adamowski’s pension…But the question was how; since Teachers Retirement credits can’t be moved to the State Employee Retirement System and State Employee Retirement credits can’t be moved to the Teacher’s system.
Well the mystery has finally been resolved and the answer lies in exactly a dozen words deep inside the existing state statutes!
Subsection 26 of Section 10-183b of the Connecticut State Statutes defines the term “Teacher” for the purposes of the Connecticut Teachers Retirement System…And subsection (D) of subsection 26 of Section 10-183b provides that “a member of the professional staff of the State Board of Education” may elect to be in the Teachers Retirement System instead of the State Employees Retirement System.
The phrase, “a member of the professional staff of the State Board of Education”is not limited by whether or not the individual is certified to serve as a teacher or administrator.
Since the State Retirement System is generally more generous than the Teacher Retirement System, the provision was obviously created so that if a Connecticut school teacher or administrator worked for a time at the State Department of Education they wouldn’t be forced to be in two different systems…the Teacher Retirement System for their teaching years and the State Employee Retirement System for their time at the Department of Education.
Instead they could be a teacher, go to work for the state Department of Education and then return to working in a school district.
But by leaving off the reference to being an employee of the State Department of Education AND a certified teacher or administrator, the laws opened up a massive loophole that Steven Adamowski is now strutting through thanks to Commissioner Pryor and Governor Malloy.
As a state employee, Adamowski will be able to sidestep the State Employee Retirement System rules – for example – having to work ten years before vesting his pension. Instead he will be able to immediately add years to his Teachers Retirement System penson – EVEN THOUGH HE IS NOT CERTIFIED TO TEACH OR BE AN ADMINISTRATOR IN CONNECTICUT.
Not only will he get to add his time at the State Department of Education to his Teacher Retirement Pension, but for every two years he works at the state he will be able to buy yet another year of retirement credits for the time he worked as a school administrator in another state.
As of now, Adamowski has ten years into the State Teacher Retirement System, time that he collected for his work many years ago when was employed by various Connecticut school districts. Since he reached his ten-year threshold, he also qualifies under the program to purchase four years of his out-of-state service. So at this point in time he only has 14 years toward a Connecticut Teachers Retirement Pension…enough for a pension, but a relatively small one..
However, with his new status as a highly paid state employee, he not only will get the benefit of additional years and the higher salary but will be able to purchase even more out-of-state time. Two years as a state employee and he can purchase one more year of out-of-state service. Four years at the Department of Education could actually mean he collects a total of more six more years of pension credits.
Factor in the $163,000 a year (and more) that he will be making at the Department of Education and this shift from being an employee of SERC to being a the State of Connecticut will increase his annual pension by thousands, even tens of thousands, of dollars.
As Governor Malloy sits on top of one of the largest unfunded state and teacher pension systems in the country, an unfunded liability that will cost Connecticut taxpayers more than $20 billion to resolve over the next two decades, leave it to back room politics of the Malloy administration to wheel and deal a way for Steven Adamowski to boost his pension at taxpayer expense.
But as the corporate education reformers like to say….”it is all for the children.”
You can read more background on the Pryor/Adamowski move here:
Pension, State Employees Early Retirement Incentive, Pension, State Employees
State employees who are eligible may elect to retire in lieu of layoff under the terms of the new Stipulated Agreement between the Malloy Administration and SEBAC:
State employee employed as of December 1, 2012 and you are a member of the Connecticut State Employees Retirement System (SERS). Offer applies to non-represented employees, including managers, as well as to members of all bargaining units.
Prior to August 31, 2011 you were under the age of 55 AND had twenty-five or more years of service.
SERS members must irrevocably elect to retire in lieu of layoff AND sign a stipulated agreement by May 1, 2013.
Retirement date: Eligible Tier I members must retire no later than July 1, 2013. Tier 2 members must retire no later than September 1, 2014.
Benefit to Tier I members (must retire no later than July 1, 2013): The eligible member may elect between the following two options:
a. Have their benefit reduced by 4.5% for each year they are under 55 as of their date of retirement (no later than July 1, 2013) and be entitled to the COLA provisions of individuals who retired after October 1, 2011; OR
b. Have their benefit reduced by 6.0% for each year they are under 55 as of their date of retirement (no later than July 1, 2013) and be entitled to the COLA provisions of individuals who retired before October 1, 2011.
Benefit to Tier II members who elect to retire no later than July 1, 2013: The eligible member may elect between the following two options:
Have their benefit reduced by 4.5% for each year they are under 60 as of their date of retirement (no later than July 1, 2013) and be entitled to the COLA provisions of individuals who retired after October 1, 2011; OR
Have their benefit reduced by 6.0% for each year they are under 60 as of their date of retirement (no later than July 1, 2013) and be entitled to the COLA provisions of individuals who retired before October 1, 2011.
Benefit to Tier II members who elect to retire after July 1, 2013 and no later than September 1, 2014: The benefit will be reduced like any other early retirement benefit (6% for each year before eligibility for normal retirement), however, individuals who elect to retire in lieu of layoff will be entitled to the COLA provisions in effect for individuals who retired prior to October 1, 2011.
Pension, State Employees Early Retirement Incentive, Pension, State Employees
Last September I inaccurately reported – ALERT/UPDATE: Arbitrator rules against Malloy Administration on significant retirement issue. Last November I wrote a post entitled, Is another Connecticut State Employee Early Retirement Incentive coming?.
The rumors and hypothesis all revolved around two factors. What was deemed to be a potentially illegal move by the Malloy Administration to grant certain hand-selected individuals special early retirement benefits almost two years ago and the broader recognition that the Malloy Administration desperately wants to reduce the state workforce — thereby moving costs from the General Fund over to the Pension Fund.
Well, while details are still sketchy, an agreement was finally reached between late last week between the Malloy Administration and SEBAC on the early retirement grievance and details will be sent out to impacted state employees within the next 24 hours.
Those who qualify under the new agreement, the parameters of who qualifies I do not know, will be given the option to “retire early” as long as they sign the necessary paperwork by May 1 and retire by July 1.
Those receiving the emails are asked to provide additional details or additional details will be posted as they become available.
Malloy, Pension, SEBAC, State Employees, Unions Malloy, SEBAC, State Retirement, Unions
Yesterday, I posted this blog about rumors spreading that the Malloy Administration has lost a massive arbitration ruling concerning the retirement incentive that was offered to some but not all state employees. The details remain confusing. An arbitration award or awards have certainly been made that require the state and SEBAC to negotiate and action to be taken by the State Retirement Commission. I will update as details become available. What is clear is that according to State employees knowledgeable about the situation, there are employees who should have been given the opportunity to utilize retirement incentives, but were not given that opportunity and the problem must now be rectified.
Although it hasn’t been officially confirmed, word is spreading that the Malloy Administration has lost a massive arbitration ruling today.
Last summer, the Connecticut State Employees Bargaining Agent Coalition (SEBAC) filed a grievance against the Malloy Administration with the Connecticut Board of Labor Relations.
The complaint revolved around the Malloy Administration’s unilateral decision to
offer to certain employees the ability to retire with 25 years of service regardless of age.” According to labor unions, Malloy’s representatives made this offer without fulfilling their bargaining responsibility with SEBAC and without making it available to all state employees.
At the time, SEBAC challenged Malloy’s action because it was;
“(1) Unfair to employees who learned about them, because it forced those employees to make a critical life-changing decision without full information or the opportunity to change their minds; and
(2) Unfair to the vast majority of employees, who management never informed about the offer at all and thus were never given any opportunity to decide.”
Union leaders demanded that the offer be made available to all eligible state employees and that employees be given an adequate time frame to make a decision.
The Malloy Administration refused and filed a State Prohibitive Practice complaint.
Apparently, earlier today, an arbitrator ruled against the Malloy Administration.
If true, the state may now be forced to negotiate a process to give all employees the ability to retire, regardless of age, as long as they have at least 25 years of service.
There are also rumors that the Malloy Administration lost on a second major issue related to the fact that it gave managers longevity bonuses when unionized employees went without those payments.
Stay tuned – more to come.
Ben Barnes (OPM Secretary), Budget Cuts, Malloy, Pension, Spending Cap Malloy, State Employee Pension
Attention Connecticut Taxpayers…
Attention Retired and Active State Employees…
The Great Pension Fix of 2012 isn’t the guaranteed fix that everyone thought it was…
One of the most important fiscal issues facing Connecticut and its future is the State’s incredible unfunded pension liability.
Adequate funding will directly impact more than 100,000 Connecticut families, as retired and active state employees, look to the State Employee Retirement Fund (aka the State Employee Pension Fund) to fulfill its legal obligation.
However, despite knowing that the financial obligations were building higher and higher, Connecticut’s public officials failed to invest the necessary funds to pay for the future pensions that it was committing too.
In no other area of Connecticut state government has fiscal policy been so poorly implemented.
Democratic, Republican and Independent governors turned a blind eye to the impending crisis. Legislators were only too happy to go along.
The failure to properly fund the State Employee Pension Fund would mean that future generations would not only be burdened, but crippled, by the massive payments that would be needed to make up for decades of underfunding.
While experts recommend that a “healthy” pension fund should be at least 80% funded, Connecticut’s State Employee Pension Fund ratio stands at 48%, the worst ratio in the nation.
But On January 23, 2012, Governor Dannel Malloy stepped forward with an initiative that would finally address Connecticut’s unfunded pension liability. See Malloy’s Press Release http://www.governor.ct.gov/malloy/cwp/view.asp?A=4010&Q=494876
By increasing pension payments by $3 billion between now and 2025, Connecticut State Government would put the fund on track and save future taxpayers billions and billions of dollars. While the cost of Malloy’s initiative was significant, the benefits were even greater.
According to the press release, “The restructuring will save the state nearly $6 billion over the next 20 years, and put the pension system on the road to long-term sustainability, something that is currently not the case.”
The press release explained that, “starting in FY2014, [Connecticut would] appropriate additional funds, over and above the Annually Required Contribution, in order to achieve 80% funding in FY 2025, and reaching 100% in 2032…”
To allow the extra payments to be made, Malloy’s plan also included amending Connecticut’s state spending cap to exclude pension contributions in excess of the Annually Required Contribution.
The Connecticut Legislature followed Malloy’s directive and this year’s budget includes the first year of Malloy’s plan.
But then just this last week, virtually unnoticed, came the news that Governor Malloy’s pension funding initiative is nothing but a blueprint.
Despite what observers assumed last February, the Malloy initiative didn’t lock the state into properly funding its unfunded liability. While it did remove a negative provision that was adopted during John Rowland’s administration, we now learn that the promised commitment that the state would finally make the appropriate payments over the coming 15 years was nothing more than a suggestion.
In fact, this governor, or any governor, could simply throw out the plan and go back to using the money for something else.
The truth was revealed last week when Malloy and the State Retirement Commission agreed to reduce the assumed annual return on pension fund investments from 8.25 to 8 percent.
They took this move because one of the bond rating agencies, Moody’s Investors Service, a firm that had already lowered Connecticut’s bond rating, recommended that states lower their assumed annual rate of return to reflect the new economic reality. Their recommendation was that states use a number more like the 5.5 percent average return that funds have been getting the last couple of years.
According to the Governor’s budget chief, the cost of moving from 8.25 to 5.5 percent would have been prohibitively expensive, so the state shifted from 8.25 percent to 8 percent.
But the real news was not the drop in the expected rate of return, but, for the first time, it was revealed that while Malloy did increase the state’s contribution to the State Employee Pension Fund by $277 million this year, only $100 million was that amount was “contractually guaranteed.”
The issue certainly appears to be complex, but it boils down to one extraordinarily key issue.
The assumption has been that the Malloy Administration locked the new funding initiative into the SEBAC agreement that he signed with the state employee unions. In that way, this governor and future governors would be required to make the necessary payments into the State Employee Pension Fund. Malloy has said repeatedly that his plan saved future Connecticut taxpayers $6 billion dollars. The implication being that the payments were guaranteed.
However, the Malloy Administration’s answers to reporters this week indicate that they did not lock the payment plan into place, after all.
As noted above, by failing to make it part of the SEBAC agreement, this governor or any governor can simply stop making the extra payments, in which case, Connecticut’s State Employee Pension Fund would remain on a collision course with the future.
At no time did the Governor or the Legislature suggest that this plan was optional. In fact, the whole reason for exempting the payments from the State’s spending cap was to allow the increased funding plan to move forward year after year.
There could be as many as four more governors before Malloy’s pension funding plan ensures that the State Employee Pension Fund reaches the 80 percent ratio.
Despite what was said, we now have a situation in which any one of those governors could destroy the whole effort.
Looking at it now, the situation is eerily similar to what happened with the State’s promised conversion to Generally Accepted Account Principles (GAAP). As a candidate, Dan Malloy promised that he would shift the state to GAAP accounting immediately upon becoming governor. Then, when he and his administration realized the full cost of that effort, he proposed a state budget that made a $75 million down payment the first year and another $50 million down payment the second year, followed by a 15 year $150 million dollar a year payment schedule that would complete the transition to GAAP.
At the time, I wrote that here at Wait, What?, “While the implementation was now scheduled to take place over 17 years and not immediately as he had promised, it was still a step forward.”
But of course, as we now know, with not enough revenues to cover expenditures, Malloy quietly decided to forgo even making those first two small down payments.
Now, two years into his term, the State has completely failed to implement the shift to GAAP accounting.
Incredibly, we could be looking at the very same situation when it comes to Malloy’s promised commitment to properly funding the State Employee Pension Fund.
For more background on this issue,
CTMirror: http://ctmirror.com/story/17515/malloy-seeks-modest-change-expected-pension-fund-earnings, http://ctmirror.com/story/15150/malloy-unveils-plan-reverse-two-decades-damage-employees-pension-fund
CTNewsjunkie: http://www.ctnewsjunkie.com/ctnj.php/archives/entry/state_pension_funds_lose_1b/, http://www.ctnewsjunkie.com/ctnj.php/archives/entry/malloy_seeks_changes_to_state_employee_pension_fund/