Pension Crisis: We Can Solve It!
Updated: Jul 5, 2018
Everybody knows we have a fiscal crisis in CT. Because our state government did not contribute to the pension fund for years, these unfunded liabilities are now growing exponentially and crowding out other important investments we need to make in education and infrastructure. This has caused the state to be down-graded by credit agencies and generally perceived as a higher risk. The situation is dire. But there is a solution! And no other politician has talked about it yet.
This week I attended the CT Conference of Municipalities meeting to hear a presentation by Gordon Hamlin, an expert on pension systems and reform. Everyone seems to talk about only two types of pensions - Defined Benefit (where the state bears all the risk) and Defined Contribution (which is a 401k and the individual bears all the risk). But Gordon advocates for a third option - Shared Risk - which takes politics out of pensions, balances the risk between the parties, and provides clear rules that cannot be manipulated or avoided by either party. They each share in the downside and upside of market fluctuations, but the terms are entirely predictable. If CT could restructure to this model (which is used with great success in WI), our problem would be solved!
So, how do we adopt a "Shared Risk" plan? First we need to appoint a Task Force of stakeholders and a mediator (Gordon volunteered to do this pro bono) who can bear the brunt of resistance. Unions will face a choice: to either be part of the solution and negotiate fair and feasible terms, or risk incurring the wrath of a conservative administration that may legislate away their pensions and benefits.
We can fix this. Let's come together and unite for CT - unite for good!