Out to plug a multi-billion-plus pension hole at the top of his to-do list, Connecticut’s new treasurer is juggling fixes that include lottery money.
Lack of contributions and poor investment decisions have caused the state’s two retirement plans, the $17 billion Teachers Retirement System and the $12 billion State Employees Retirement System, to dig themselves a hole which has put Connecticut’s state finances in jeopardy.
That’s why Shawn Wooden, the state’s new treasurer, is eyeing proposals like tapping the state lottery to make up the difference, as well as stretching out bond payments.
He said one of the biggest problems the state has is a lack of budgetary flexibility, which hurts the payment stream for retirees, and puts a further strain on the state funding deficit.
He’s waiting on Gov. Ned Lamont’s final say on his annual budget proposals, due February 20. Lamont currently has issues with a $1.45 billion deficit in the state’s $20 billion operating budget, set to take effect in July.
“In particular, the mission is to create and have a pension system that is long-term and sustainable and to do that in a manner that’s affordable for taxpayers,” Wooden told the Connecticut Post.
One of Wooden’s proposals is to increase the length of time the state pays off its pension bonds so it can focus on paying down liabilities that can grow upwards of $3 billion a year for just the teachers’ system.
Other possibilities to bridge the pension gap include accessing lottery revenue and renting out state-owned real estate, or making benefits changes as a means to help solve the problem. These were first floated by state’s legislature-appointed taskforce, the Pension Sustainability Commission, focused mostly concerned with the state’s $37 billion unfunded liability,
Wooden said lotto could “play a role” in the funding fix, but also said taxpayers should be paying attention to the issue as well. He added that the pension bonds have clauses that cap how much he can do to restructure the debt, but his plan works within those guidelines.
Connecticut recently lowered its assumed rate of return, from 8.5% to 8% for the teachers’ retirement system, and 6.9% for the employees’ fund.
The state of Connecticut is 41% funded, according to Pew Charitable Trusts.
Wooden took over from Denise Nappier Jan. 1.
Neither the treasurer, the sustainability commission, nor Cavanaugh Macdonald Consulting, who has provided insight for the teachers’ fund, was able to be reached for comment.