Connecticut Gov. Dannel Malloy and a group of unions struck a deal last week that will spread the state’s pension contributions over a longer period of time, thus lowering the short-term cost of those payments.
The deal still needs approval from the legislature; but if they don’t vote on the matter within 30 days of the next legislative session (which begins Jan. 4), the proposal becomes law.
The deal also lowers the assumed rate of return of the state’s pension fund to 6.9 percent from 8 percent.
More from the Wall Street Journal:
Mr. Malloy, a Democrat, said that without the agreement, the state’s pension payments could balloon from about $1.5 billion a year to $6.65 billion in 2032.
The deal means that state pension payments will now peak at $2.4 billion in 2032.
Under the Connecticut agreement, annual pension payments would be more affordable because the state would pay smaller annual pension payments but over a longer period. The state was supposed to pay off much of its pension obligations by 2032. This deal pushes that date to 2046.
Union leaders said they agreed to the deal because it didn’t make changes to retirement benefits or contributions.
The state’s annual pension payments were supposed to fall to only a few hundred million dollars a year after 2032 and then would rise again. Now, with the new deal, the state will pay more than $1.5 billion annually through the 2040s.