LETTER: Pension Bonding — A Colossal Mistake for Hamden

To the Editor:

Pension bonding would be a huge financial blunder for Hamden.

It would essentially make pensions the highest financial priority of the town, above the schools and town services. If approved, the Administration and the Council will have shown total disrespect for taxpayers and the town’s future.

The devastating effect of bonding on taxes will impact property values severely and stifle economic growth, thus compounding the recession. The huge pension burden would initially account for roughly 15 percent of the total budget, equivalent to 7.5 mills of taxes, and are predicted to rise to 13.5 mills by 2039.

Hamden has about 1,450 covered employees, about half already retired and half yet to retire. That number does not include teachers and school administrators but does include non-professional BOE people. Pensions for people hired after 2007 are funded through the state CMERS plan. That cost is included in the numbers below as written in the actuarial study of January 31, 2013.

The biggest problem with bonding is that it makes the town’s commitment to full funding irrevocable. Once bonding is done, state law requires that the town make full, non-negotiable, actuarially required contributions (ARC) every year to the fund. The town also guarantees the expected growth of fund investments. So when the stock market drops, as it inevitably does, payments will be increased further. 

The actuaries estimate debt service payments on pension bonds to be $7 million a year. ARC payments to the Hamden plan would start out at about $22 Million next year and increase to $32 Million by 2039. Payments to the state plan are currently about one Million but are expected to grow to about $15 Million at the same time. Including all three parts, next year’s total pension payment would be $30 Million and grow to $54 Million in 2039.

Other benefits add substantially to the town’s cost. This year the health plan is budgeted at $34 Million and will surely grow much larger if unchecked. That makes next year’s combined cost for pension and health care a whopping $64 million. By 2039 these benefits alone will likely exceed $100 million, half the total 2013 budget.

Hamden workers deserve a good retirement but they do not deserve the glorious benefits of the past. It is time for the taxpayers to say loud and clear that bonding is unacceptable until the recipients compromise benefits. Generous formulas, early retirement and automatic COLA increases must end.

George Levinson
Hamden

Editor's Note: The Legislative Council will hold a forum on entering into Pension Obligation Bonds on Wednesday at 7 p.m. at Thornton Wilder Auditorium at Miller Memorial Library.