Connecticut Comptroller Sean Scanlon held a rare press conference at the Capitol today in which Republicans, Democrats, municipal management, labor unions and Gov. Ned Lamont all joined together in support of a proposed fix to the Connecticut Municipal Employees Retirement System (CMERS).
CMERS, which allows municipal employee groups to join a pension plan run by the state, had long flown under the radar when it came to Connecticut’s pension problems, but rapidly escalating costs have left towns and cities scrambling for funds they don’t have.
The system suffered from rising unfunded liabilities, cost of living adjustments tied to high inflation and a retirement wave of municipal employees, driving costs up 75 percent for 107 participating municipalities in five years. To address the problem, Scanlon convened a working group to find a solution to a system which hasn’t been tinkered with or reformed much in decades.
“For years Connecticut cities and towns have seen record increases in their pension costs,” Scanlon said. “And for too long, conventional wisdom was that nothing could be done, and no one should even try, because the towns and labor would never agree on potential fixes. That old, broken way of thinking about the challenges our state faces must end and, in reaching this agreement, we are proving it can.”
Joining him were municipal leaders from Hamden, Windsor Locks and Manchester, who said the reforms – which will have to be passed by the General Assembly – would save their towns between $500,000 and $3 million in the first year alone.
According to the Comptroller’s figures, the reforms will save municipalities $32.3 million in the first year and $843.1 million over the next thirty years.
The reforms include a change in how annual cost of living adjustments for retirees are calculated, re-amortizing the pension debt from a 17-year payoff to a 25-year payoff, offering incentives for employees to stay on the job for 5 years after retirement and to continue the working group to create a new tier for CMERS in an effort to get more municipalities to buy in.
Executive Director for AFSCME Jody Barr, which represents 15,000 municipal employees, said the savings for towns and the stability that comes from fixing CMERS will be a benefit to his members, allowing municipalities to retain and hire more employees and ensuring that workers are provided a pension for retirement.
“The new changes strengthen the overall system by enhancing worker benefits and lowering costs that would encourage additional towns to participate so that more workers can have the benefit of a pension. It also will help to ensure future town and BOE employees can enjoy the benefits of a pension,” Barr said. “During a time when pension benefits in Connecticut have eroded over the past decade, we are excited this agreement is a win for municipal and BOE employees and a win for municipalities and look forward to continuing this relationship to further strengthen CMERS for our members.”
Although a detailed breakdown is not yet available, the changes to COLAs for retirees were described repeatedly as “complicated,” involving pension fund performance, inflation, eliminating the minimum COLA and raising the maximum COLA. The state will also move to re-amortize the $1.3 billion in debt CMERS has accumulated in order to smooth out the costs, similar to what Gov. Ned Lamont did with both state employee and teacher pension debt.
Finally, the system will provide an incentive to keep municipal employees working after their retirement by allowing them to work up with pay up to five years while their pension payments are deposited into an interest-bearing account. They will then receive that money as a lump sum when they stop working. The move could also help ensure that municipalities do not experience a “brain-drain” when long-time employees with deep institutional knowledge leave service, and help address worker shortages.
Although there is not yet a bill for the General Assembly to vote on, it appears the proposal will likely sail through, with House Speaker Matthew Ritter, D-Hartford, and Republican leaders Rep. Vincent Candelora, R-North Branford, and Sen. Kevin Kelly, R-Stratford, also speaking at the event in support of the CMERS fix.
“Addressing Connecticut’s municipal pension fund crisis is a bipartisan priority,” Kelly said. “Towns and taxpayers are overburdened by surging costs. This agreement helps preserve the retirement benefit program and puts it on a path to long-term sustainability. That’s good news for retirees, towns, and property taxpayers.”
The changes would also have to be approved by the State Employees Retirement Commission, which is made up of labor and administration officials, as well as members of the Comptroller’s Office. Jody Barr indicated he was not only speaking for AFSCME in support of the deal, but for the larger State Employees Bargaining Agent Coalition (SEBAC), which is made up of many unions who also represent municipal employees.
“Reaching an agreement on the future of our municipal retirement system is not only important for the sake of ensuring its continued ability to fund pensions for the workers who have earned them, but this is also needed to protect taxpayers by providing financial relief to cities and towns,” Lamont said.
Municipal associations like the Connecticut Conference of Municipalities and the Council of Small Towns had been reaching out to the comptroller to find a solution for the escalating costs. The working group will continue to address CMERS issues over the next year, focusing on concerns by other municipalities that do not participate in the program, and propose additional reforms.