By STEPHEN SINGER
Associated Press
HARTFORD, Conn. (AP) _ Pension funds valued at $29 billion and even greater unfunded liabilities are giving state treasurer Denise Nappier and Republican challenger Tim Herbst plenty to fight about.
Nappier, state treasurer since 1999, is telling voters that despite a heavy debt burden for pension obligations, Connecticut has saved money in interest costs and is headed in the right direction, reducing the debt. Herbst, who acknowledges he’s the underdog, is using the incumbent’s longevity in office against her.
“Connecticut is broke,” Herbst says in a TV and Internet ad, standing before a large hole in the ground that’s getting bigger. “Our pension system is failing and Denise Nappier keeps on digging.”
He’s proposed a reduced reliance on pensions and reduced spending and borrowing to cut Connecticut’s debt.
Nappier says the Teachers Retirement Fund and State Employees Retirement Fund, the two largest plans that invest assets for about 194,000 state and municipal employees, teachers, retirees and others, are “on a path toward sound financial footing.”
“I’ve sounded the alarm for a long time,” she said. “No longer will we allow the can to be kicked down the road.”
For the state employees’ fund, the unfunded liability is $23.8 billion as of the end of the state’s budget year in 2013 and $24.9 billion for the teacher’s fund at the end of the budget year in 2012, according to the treasurer’s office.
With low interest rates, Connecticut exchanged higher-cost debt, saving about $180 million since 2008, Nappier said.
The state “hasn’t always paid into the plans what it should,” she said, and for the state employees’ retirement fund, a “spotty track record” dates to the 1970s, followed by years of fewer contributions than were recommended by actuaries, she said.
The state now has a “solid plan in place to virtually eliminate” all pension liabilities in 18 years, Nappier said. The two funds have generated returns of nearly 12 percent over the past five years, which the treasurer called “pretty remarkable” following the steep decline during the financial crisis of 2008. The returns exceeded investment targets of about 8 percent, she said.
The actuarial investment assumptions are calculated by a consulting firm.
Peter Gioia, an economist at the Connecticut Business and Industry Association, said the state has benefited from a “pretty darn good investment performance,” but he’s skeptical about the investment target.
“To think we’re going to have consistent 8 percent returns going forward is probably a little rose-colored and optimistic,” he said.
Funding the pension is the responsibility of the governor and General Assembly, not the treasurer whose job is to alert the governor about problems and manage investments, Gioia said.
Moody’s Investors Service said that as of 2012, Connecticut had the second-highest pension burden, after Illinois. Net pension liability relative to all government fund revenue was 243 percent in 2012.
Nappier was first elected in 1998, narrowly defeating Paul Silvester, the Republican incumbent who eventually was sentenced to prison on corruption charges involving pension fund investments. She was re-elected in 2002, 2006 and 2010 by comfortable margins.
“The work never ends and there’s always another challenge that attracts my interest,” she said.
If Nappier is re-elected on Nov. 4, she said she realizes she’ll have to quit eventually, but won’t say when.
“I’ve not set an end date yet,” she said
Herbst says he knows he has a fight on his hands against a well-known incumbent and believes voters are in the mood to turn out office-holders.
“I relish being the underdog,” said Herbst, Trumbull’s Republican first selectman. “I think this year there is a very much anti-incumbent mood.”