July 25 – As Connecticut continues to reduce one of the highest state debt burdens in the nation – the result of setting aside too little money for pensions and retiree health plans – States nationwide could see their debts swell this year in the wake of swoon stock markets, according to a new study.
The Advocacy Association Reason Foundation predicts a 6% decline in investment returns for fiscal 2022 ending last month, which would help push unfunded liabilities above $1.3 trillion through nearly 120 plans responsible for protecting state pensions.
Last Wednesday, the governor’s administration. Ned Lamont announcement $4.1 billion in transfers from the state budget for the fiscal year to the reduction of unfunded liabilities. Coupled with smaller payments over the previous two years, the Office of Policy and Management calculated at $12 billion potential savings over the next quarter century.
As of the 2021 financial year, Connecticut only funded 53% of $37.6 billion for which he is liable for future pension payments, according to the Reason Foundationwhich has offices Los Angeles and washington d.c. who paired Connecticut with Kentucky for the country’s worst unfunded debt, with New Jersey third.
At the other end of the table, New York dragged only Washington and Wisconsin for the best profile, with all the New York one outstanding pension obligations funded by a $46 billion surplus to help absorb any prolonged decline in the stock market.
Earlier this month, Lamont said he was preparing for the impact of the market decline on Connecticut financial obligations, coupled with the likelihood of an economic downturn impacting tax revenue. The Dow Jones Industrial Average was down 12.8% on the year on Wednesday afternoon, with the Nasdaq down twice that margin.
Lamont said the state’s “rainy day” fund, now at its $3.3 billion legislated ceiling, gives the state an option to track its overall debt and obligation reduction targets.
“Over the past 30 years, fixed costs have been rising, accelerating, increasingly gobbling up operating expenses,” Lamont said in a Hartford press conference on July 7. “Previous administrations just added credit card debt and hoped someone would pay it off – it’s like a game of Pac-Man that eats more and more budget. We have a long way to go but we started bending that curve.”
Lamont said the state had focused during his three years in office on paying off pension obligations, after razing $11.5 billion through additional contributions to the state employees’ pension scheme and the teachers’ pension scheme.
Fitch Ratings assigned an “AA-” rating in May to Connecticut latest general bond bond issue, at the lower end of its “very high capacity” second-tier redemption, even taking into account the possibility of a recession and market fluctuations. Fitch Ratings is a New York– affiliate Hearst Corp.who own CTInsider and Hearst Connecticut Media Group,
“The state has consistently demonstrated its ability to cover its relatively high fixed costs, including making full actuarial contributions to pensions,” Fitch analysts wrote in their May assessment. “The burden of long-term state responsibility is high and among the highest for WE United States, but still considered moderate relative to personal income. »
Includes previous reports from Ken Dixon.
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