According to Connecticut, its public pension plan is 47% funded. However, ALEC noted that states use a higher discount rate to estimate unfunded liabilities than the one used by private plan. Therefore, it increases the funding ratio.
Connecticut normally uses an 8% discount rate to estimate its unfunded liabilities. However, Gov. Dan Malloy and the State Employee Retirement Commission lowered the rate to 6.99 percent earlier this year. The change was part of the state’s effort to extend the amortization period of unfunded liability to 2046.
In other words, Connecticut will delay paying down its unfunded liabilities of public pension plans. There is possibility that the delay will cause tax increases, reduced state services in the future. The delay will also likely to cause cuts in pension benefits, according to the report.
In 2011 and 2015, Connecticut implemented two large tax increases. According to Benjamin Barnes, the revenues from those tax increases were not enough to meet the rising pension costs.
