Gov. Ned Lamont was joined by Connecticut Comptroller Sean Scanlon and State Treasurer Erik Russell at the Capitol touting a new pension report that found taxpayers will save $18 billion on pension payments over the next fifteen years after the state funneled more than $8 billion toward its state employee and teacher pension debt.

The pension debt paydown is part of the “fiscal guardrails” enacted in the 2017 bipartisan budget. The extra payments made toward the pension debt have essentially lowered the required annual pension payments by $737 million that taxpayers would have otherwise been on the hook for, freeing up money for the budget.

Lamont, who is facing calls from fellow Democrats to adjust the state’s fiscal guardrails so less money goes toward the pension debt and more flows into the state’s General Fund said strengthening the pension plans fulfills the state’s promise to retirees while also allowing more investment in social services.

“It’s freed up an awful lot of money to make key investments in social services and we wouldn’t otherwise be able to do it,” Lamont said. “It’s a far cry from where we were seven years ago.”

While Connecticut taxpayers are saving money through payment reductions, most of that money has already been spent on a $400 million tax cut for middle- and working-class families in 2023 and funding early childhood education and daycare programs, according to Lamont, but there will be another $120 million increase in savings this upcoming year.

“Because our unfunded liability is coming down, we were able to have the biggest tax cut in the history of the state,” Lamont said. “We’ve been able to have thousands more have access to daycare, we’ve had tens of thousands of folks have a no-cost community college, we’ve been able to make sure municipal aid and K-12 funding has continued to go up every year for six straight years.”

“It’s under the spending cap, which means that you can balance the budget and use that money under the cap without any tinkering with the budget as it is right now,” Scanlon said. “The rough math is about $120 million more than we have been able to use on this last year.”

Historically, Connecticut saved nothing toward its pension plans and didn’t start making the full annually required payment until 2011, when Gov. Dannel Malloy had to implement two major tax increases to cover the escalating costs. Lamont says the state’s success in paying down the debt and reducing the payments shows that defined benefit plans work and can be maintained.

“It’s critical to the entirety of how our government works,” Russell said, adding the state’s progress on paying down its pension debt has contributed to better state credit ratings. “We need to make sure that we protect this culture and never allow ourselves to return to the habits of ignoring our obligations.”

Pressed as to whether he would propose adjusting the fiscal guardrails in his upcoming 2025 budget, Lamont would only say that he is “pretty strict on this,” and wants to avoid increases to Connecticut’s fixed costs, which include pension payments, Medicaid, debt payments, and adjudicated claims. Connecticut has reversed a long trend of fixed costs rising faster than revenue creating a systemic deficit, although a steep increase in Medicaid costs is causing budget concerns.

Lamont has strong support from General Assembly Republicans for maintaining the fiscal guardrails, who said, “spending discipline works” and that the guardrails have brought “long-term positive results for struggling middle-class families,” in a press release.

“We are chipping away at our state’s crushing credit card debt,” Sen. Eric Berthel, R-Watertown, Sen. Henri Martin, R-Bristol, and Sen. Stephen Harding, R-Brookfield, said. “That pay down is not only lessening our budget burdens: It is freeing up money for vital human services to help support our most vulnerable residents. It is also enabling much-needed tax cuts.”

However, Democrats in the General Assembly increased their ranks in the last election, and Senate President Pro-Tem Martin Looney, D-New Haven, has posited the volatility cap – which is responsible for the pension pay down – could be maintained but should be adjusted to allow more surplus revenue to be appropriated, or moving more items, like aid to distressed municipalities, out from under the spending cap.

Although Lamont refused to draw a hard line in the sand concerning possible adjustments to the guardrails, telling reporters they will have to await his budget in February, Scanlon said that it is important that the savings from those guardrails are felt by Connecticut residents.

“I think we have made incredible progress as a state,” Scanlon said. “I think it’s also clear to note that a lot of people in this state are not always feeling that progress and our challenge – and I know the governor accepts this challenge whole-heartedly – is to make sure our state’s fiscal progress and increasing fiscal health is shared and felt by all the people of Connecticut.”

“It’s fair to say we’re going to have an honest and balanced budget. We haven’t done that for thirty years in this state until the last six or seven years,” Lamont said. “I want to make sure we have a balanced budget for our kids going forward as well.”

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