NEW YORK, NY – Connecticut cities are under strain in trying to fund their long-term retirement benefit liabilities. Like Connecticut state government, these problems are rooted in part in poor management. But better management may only go so far in stabilizing cities’ pension programs.
Manhattan Institute Senior Fellow Stephen Eide suggests in a new report that dramatic retirement benefit reform may be more urgent to shift to defined contribution for city workers in Connecticut than state workers.
Bridgeport, New Haven, Hartford, Stamford and Waterbury have promised hundreds of millions of dollars in benefits to its workers, but with the exception of Stamford, they all have weak economies and elevated rates of poverty. A weak local economy raises questions about the affordability of defined-benefit programs.
Eide notes that:
- Hartford, New Haven, Stamford and Waterbury operate their own independent pension systems. Bridgeport participates in a statewide system but the city is responsible for meeting its own pension obligations. All of these cities also offer retiree health-benefit programs that are run locally.
- The increase in property tax revenue hasn’t kept up with the need for more pension funds in New Haven, Hartford, and Stamford. Hartford’s property tax revenues, for example, grew by $2.7 million from FY08 to FY17 in real terms, while its pension costs grew by $16.7 million.
- While annual costs for retiree health care have not risen as dramatically, they are still high, totaling $132 million for all five cities. This is a questionable expenditure, since the private sector has largely phased out health-care benefits for retired workers.
- At both the state and local level, rising pension costs have “crowded out” funds available for infrastructure, the social safety net and other public services in Connecticut.