It’s been a long haul — and it’s far from over — but Meriden is on a path to catching up with its chronically underfunded employee pension plans. This was spelled out in detail by reporter Matthew Zabierek in last Sunday’s Record-Journal.
For decades Meriden had been shortchanging those obligations, and for years Meriden taxpayers have been paying the price. This year, 4.7 percent of the city’s budget — $9.3 million — will go toward “catch-up” payments to those funds, in addition to the “normal payment” the city makes every year.
This situation goes back to 1980, and it continued through the terms of various mayors and city managers. In nearly every year from the 1980s to 2007, the city only paid between 60 and 80 percent of the recommended contribution — the “actuarially determined employer contribution” — to its fire and police pension plans. In 2000, the city made no payment at all, despite actuaries recommending a payment of $7.2 million.
Since 2007, the city has been back on track, paying its normal contribution in addition to actuarially recommended catch-up payments each year. But it will take a long time to close the gap — 19 years to catch up on the (newer) city employee pension plan, which now includes public safety personnel, and 24 years for the (older) plan for fire and police personnel hired before 2003.
Previous city leadership too often took advice that they didn’t need to fully fund the plans, and in some years the cost-cutting was done specifically to keep the mill rate flat. The older fund was established in 1980, and immediately the city started underfunding it by 75 percent. Before that, the city used a “pay-as-you-go” system.
All of that was unsustainable, and made no sense even back then. Now the price is being paid.
But that can be seen as a good thing: The city is now on a rational schedule to catch up, over time, for which recent leadership deserves credit.
Since the city began paying its pension bills in full in 2007, its bond rating has risen several tiers, allowing it to receive better interest rates for large projects, such as the Platt and Maloney high school renovations.
Trouble is, the $9.3 million catch-up payment is money that could otherwise go back to taxpayers or be spent on services.
The moral of the story? “You have to pay your bills,” said City Councilor Brian Daniels. “Period.”
We can only hope that Gov. Ned Lamont and our state lawmakers are listening, because underfunded pension plans are also a big part of Connecticut’s fiscal ills.