Today’s post was written by the Connecticut Coalition for Retirement Security’s Alisha Blake.
Public sector pensions are a complex policy issue, even for state and local government policymakers. With most states’ pension systems carrying unfunded liabilities and the private sector, including large corporations, continuing to diminish retirement benefits to its employees, it’s become easy to spin the narrative against the public sector workers who collect them.
Connecticut is certainly no different. We see ultra-conservative think tanks like the Yankee Institute constantly attacking state workers and their benefits. They claim that the state’s taxpayers are primarily on the hook for these benefits and that the workers themselves have made no sacrifices when it comes to shoring up an unfunded liability.
Both of Connecticut’s largest public pension funds, the State Employees Retirement System (SERS) and the Teachers’ Retirement Board (TRB), have seen many changes through the collective bargaining process, and every single one of them has led to public employees paying more of their earnings and receiving less of a benefit in retirement. Why the sacrifice? Because public employees care about the health of their pension funds. It is essential to know the truth about the history of these funds and what has been done to make them more solvent when discussing public pensions.
Collective bargaining ensured adequate funding from the state:
First, without collective bargaining, Connecticut’s largest pension systems may never have experienced proper funding at all. These systems were not reliably funded until public sector employees organized in the early 1980s and demanded funding of both the SERS and the TRB as part of the collective bargaining process. Seventy-five percent of the current underfunding is due to obligations for workers who started employment with the state over 30 years ago.
Collective bargaining created new tiers:
Through the collective bargaining process, public employees have negotiated the following to ensure the pension system’s health:
- Closing SERS Tier 1 to new employees and creating a SERS Tier 2 in 1984.
- Creation of Tier 2A, which increased employee contributions by 2% in 1997.
- The State Employees Bargaining Agent Coalition (SEBAC) unions collectively bargained:
a. New employees hired after July 1, 2005 to contribute an additional 3% of their salary over 10 years towards their retiree medical benefits in 2009.
b. Creation of SERS Tier 3 that increased employee contributions, the retirement age, and vesting threshold to receive retiree medical benefits. It also changed the final average salary formula from the highest three to five years in 2011.
c. In 2011, all state employees, regardless of hire date, had to increase their contributions by 3% over 10 years for retiree healthcare.
d. The normal retirement age was also increased by three years for current employees retiring after June 30, 2022 in 2011.
Collective bargaining created real savings:
In 2017, collective bargaining created a fourth tier with a lower pension multiplier, increased employee contributions, and changed the cost-of-living adjustment for retirees from a fixed rate to a variable percentage. When those changes were evaluated, they found that the changes made in 2011 and 2017 greatly stabilized the state pension fund.
After this, the Office of the State Comptroller was required to assess these savings annually in his SEBAC Savings Analysis Report. This first report showed how the state achieved a net savings of $1.7 billion as a result of programs collectively bargained through the 2017 SEBAC agreement. The report covered savings achieved collectively for Fiscal Years 2018 and 2019 and lays out each component from the 2017 SEBAC agreement with a breakdown of its basic program explanations, targeted savings, and achieved savings for Fiscal Years 2018 and 2019. This report was the first of what will be an annually updated analysis, as required by law.
As you can see outlined here, when groups attack public pensions they unfairly blame public employees for underfunding that is of no fault of their own. Public employees, in fact, have held up their end of the bargain and paid into these systems with each and every paycheck. Pensions provide the most secure retirement, and the more people who can retire securely, the better is it for the entire state’s social and economic well-being.
