SEBAC 2022 - January 2024
Executive Summary:
This January 2024 study updates an initial study in March 2023 of the cost of the SEBAC 2022 wage agreement between Connecticut and its state employees. The General Assembly approved the agreement in the second quarter of 2022, when the Office of Fiscal Analysis (OFA) published an analyis of the cost of the four-year agreement, without including an estimate of the associated increase in the state’s future pension obligation. This study and the initial study include two sets of analyses: (1) a comparison of OFA’s estimate of non-pension costs to actual non-pension cost data 9 and 18 months later, respectively; and (2) an estimate of the impact of the wage agreement upon the state’s future pension liability which revealed an increase in future pension costs of $4.5 billion, an enormous expense not previously disclosed.
The analysis of the pension impact involved a comparison of three different reports by the state’s pension actuary, Cavanaugh Macdonald. Two signifcant things occurred between CavMac’s valuation reports of the State Employees Retirement System pension fund as of June 2021 and June 2022: the SEBAC 2022 agreement and a large special deposit into the SERS fund. The future pension liability declined $2.2 billion from the 2021 to the 2022 valuation report. Yet, a special CavMac report showed that the special deposit alone reduced the future obligation by $6.8 billion. By logical implication, the SEBAC 2022 wage agreement increased the future obligation by $4.5 billion.
