Connecticut has seen increased revenue over the last few years, particularly from income tax withholdings, resulting in multi-billion-dollar budget surpluses. Most of that surplus, however, is already earmarked to pay down a pension debt that still sits at nearly $40 billion.
During a press call on Thursday, Office of the State Comptroller Director of Policy Charlotte Moller, outlined the state’s estimated budget surpluses for fiscal year 2023. According to state law, surpluses are deposited into the Budget Reserve Fund, which has a cap of $3.3 billion. That cap has been met, so additional surplus deposits from the Volatility Fund (which is home to investment returns for the state) have to be used to pay down the state’s pension debt.
The state made $1.87 billion in additional payments toward that liability deficit this year and has made surplus deposits of $7.6 billion since 2018. Even with those payments, however, the state still carries a total of $39.1 billion in unpaid pension liability, split between state employees (close to $21 billion) and teachers ($17 billion).
These surplus payments were established as part of a budget overhaul in 2017 that created certain fiscal guardrails aimed at paying down this debt, which tied the state to large yearly debt payments. As a result, the state has been able to reduce those annual payments by hundreds of millions of dollars. The Lamont administration holds that this is the best use of available surpluses because those debt payments threaten the state’s potential economic growth.
That pension debt was accrued in part because of policy decisions made by previous administrations. Former governor John Roland struck a deal with the State Employee Bargaining Agent Coalition (SEBAC) which caused pension payments to balloon rapidly, leading to tax increases in 2011 and 2015 under Gov. Dannel Malloy and has been a weight around the state’s budget conversations.
Current State Comptroller Sean Scanlon, however, believes lawmakers, the Governor, and his office are doing the best they can to balance paying for their debts and helping current residents. Last year, the state passed a $660 million tax relief package, which included a $750 child tax credit. In 2023, additional tax reductions lowered income tax rates for the first $10,000 for individuals and the first $20,000 for married couples.
“I think what we’re seeing right now is we’re finding a balance between meeting the immediate needs of people and addressing long-term problems that went unaddressed for decades, which is why they are such systemic problems,” said Scanlon. “We have $40 billion-plus of pension debt because generations of Democrats and Republicans kick the can down the road and prioritized the needs of right then and now versus what would be ultimately the long-term needs. And so I think the governor and the legislature have done a very good job in the last couple of years to find that right balance between taking care of some of the legacy debt that racked up over the past couple decades and meeting the needs of folks.”
Was this article helpful?
Topics on this page
Republish our articles for free, online or in print, under a Creative Commons license.
In addition to the pension funds, there is about 20 for state retiree health and 29 for long term bonded debt and other. Not following why the total debt figure was not used.