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Expert Calls Projected CT Pension Returns “Delusional”

July 21, 2017 By Staff
Expert Calls Projected CT Pension Returns “Delusional”

A Bloomberg report sheds some light on just how unrealistic Connecticut's projected teacher pension returns are.

A new Bloomberg report on Connecticut’s pension debt demonstrates how “delusional” the state’s expected return has been, for years now.

Bloomberg‘s Martin Z. Braun interviewed Richard Warr, a finance professor in North Carolina, who didn’t hold back on Connecticut’s projected teachers pension return of 8.5 percent, which was in effect from 2001 through 2015.

“Eight-point-five is delusional, 8 is still delusional, in the 6s is a bit more realistic,” said Richard Warr, a professor of finance at North Carolina State University’s Poole College of Management.

Connecticut changed its assumed return from 8.5 percent to eight percent in November 2015, according to Bloomberg.


Why is such a high projected return a major problem for state taxpayers? Braun explains:

The failure to meet such targets is significant because governments need to boost contributions to make up the difference. Doing so would worsen the financial squeeze on Connecticut, which was downgraded by all three major credit-rating companies this year because of its budget deficit.

Connecticut’s pensions are funded at only 36 percent right now, but Gov. Dan Malloy (D-Conn.) signed a deal to extend the current benefits package from 2022 to 2027.


Malloy will fight to get his deal with the state employees’ union approved by the legislature later this month. Malloy traded five more years of state employee benefits for $1.5 billion in two-year concessions on wages and pensions.

The assumed return, though, will continue to create problems for the state.