Sunday, January 12, 2014

A financial time bomb': State pension system is one of the country's most underfunded By Johanna Somers

State pension system is one of the country's most underfunded
Retired Connecticut state employees received the highest annual pensions in the country in 2011, despite contributing less out of their paychecks than the national average. That meant the state's pension system was the second-most underfunded in the United States, in worse shape than every other state's except Illinois'.
Connecticut would have to allocate about $70 million in additional funds each year for 18 years to close the funding gap in the major state employees' pension system, according to actuarial estimates. And that wouldn't address the $11 billion gap in the teachers' retirement system, which would need tens of millions of dollars more every year during that same period.
To demonstrate the size of the problem: It would cost each man, woman and child in the state $12,157 to close the $44 billion funding gap afflicting the state's two largest pension systems and its two retiree health benefit programs. Since the mid-1990s, the state rarely has met its required contribution, although it did so in 2013.
Now, closing the gap means either higher taxes, more borrowing, new sources of revenue or less to spend on education and social services or - more likely - all the above.
"There is a financial time bomb that is ticking," said Art Renner, executive director of the Connecticut Society of CPAs. "If we continue to let elected officials ignore these problems at some point in time, we are going to find ourselves in a similar situation as Detroit or Illinois, which are in bad shape. We would prefer Connecticut to avoid that."
The Day conducted a months-long investigation of the state's union-negotiated employee pensions and the system that administers pension and health benefits for retired public school teachers. The investigation, which included dozens of interviews and Freedom of Information requests for documents, shows:
• The average annual pension in 2012 was $31,666 for a retired state employee and $47,386 for a public school teacher or administrator. Most state retirees also earn Social Security; public school retirees do not.
• The average total employee contribution is $20,355. For teachers, it's about $271,333, although that figure includes payments for annuities for about 40 percent of the retirees.

• In 2012, the top state pension earner was a retired state employee who received $276,364, according to data from the state comptroller's office. He is in the state's Tier I for retirement - the oldest, most generous and now closed tier. Of the 45,455 retirees who were collecting retirement in 2012, two-thirds (30,472) were in Tier I.

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