The Truth Behind This Debt Mess
Previous administrations negotiated generous pension plans for state workers, but failed to set aside money to pay the bills for these plans when they came due. This forced the next administration to either rob Peter to pay Paul or kick the can down the road and let yet another administration deal with the problem.
If we were to continue this kind of destructive behavior, the bill would become so massive that our children (today's Millennials) would be crushed under the weight of this accumulated debt.
The Courage To Do the Right Thing
This is the first time in the history of Connecticut that a current administration is making a concerted effort to pay off old debt and at the same time, invest in our future.
It hasn't been easy. We've had to make some tough choices. Funding these old pension contracts is costing us over $1 billion a year. That's money that could have been used to improve your neighborhood, make your commute to work easier and cut your taxes.
The good news is that going forward all pension contracts are being negotiated with an emphasis on fairness to both state workers and taxpayers. The price tag will be reasonable, affordable and factored into future budgets instead of passed on to future generations.
Pension Plan Basics
Right now we have four tiers of pension plans: 1, 2a, 2b and 3. The last three are funded to about 92-95%. That's pretty good. Ten years ago we had funded only 50% of our pension obligations.
The big stickler is the Tier 1 pension plan. It's costing us a bundle. Combined, Tier 2a, 2b and 3 cost us $300 million a year. Add in Tier 1 and the cost skyrockets to $1.3 billion. And we have a contractual obligation to continue paying this until 2037.
Now compare the Tier 1 plan, which was negotiated decades ago and costs us $1 billion a year, with Tier 3. That pension plan was negotiated by Governor Malloy and is projected to save us $1 billion each year for the next 20 years.
The Truth
There are politicians whose primary motivation is getting re-elected. They will never do anything to upset the apple cart.
Then there are those who are public servants. They risk being attacked by the very people who could have fixed the problems when they had a chance, but didn't because that would have upset the apple cart.
They also risk an unfavorable rating by constituents who may not know the truth. Now you know the whole truth about the pension funding story. There are more, like the transportation story. We're working to fix that problem too.
Don't lose hope. It's often when things seem their bleakest that you see the light at the end of the tunnel with your very next step. At least we're finally moving in the right direction -- one in which we can hopefully recession--proof our lives and never have to deal with these problems again.