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Report: CT Could See High Pension Costs “For as Long as 50 Years”

June 11, 2018 By Staff
Report: CT Could See High Pension Costs “For as Long as 50 Years”

The new, alarming report from Harvard University highlights the breadth and depth of the pension problems Connecticut is facing.

A new report from the Harvard Kennedy School highlights the depth and breadth of Connecticut’s pension problems, despite any reform efforts made by the governor and legislature in recent years.

The report, highlighted in a recent Hartford Business article, notes that Connecticut is “likely to see these current high levels of cost persist for as long as 50 years if returns fall short of expectations.”

…Pennsylvania and Connecticut are in nominally better shape, thanks to recent reforms in which both states increased contribution rates to more than 30 percent of payroll (see Figure 17). That said, our stress test simulations found that both states are likely to see these current high levels of cost persist for as long as 50 years if returns fall short of expectations.

The Harvard study concluded that any market downturn could put Connecticut on the hook for pension obligations for decades more.

The clear finding for Connecticut is that market downturns could increase that cost beyond the state’s capacity to pay under the current funding policy. As a result, current high costs are likely to persist for decades under scenarios where investments underperform.

Dealing with the pension problem should be a top priority for the next governor of Connecticut, and will be a key issue on the campaign trail this fall.