Connecticut Treasurer Erick Russell speaks about the state pension fund in Hartford, CT on Dec. 12, 2025. Credit: Karla Ciaglo / CTNewsJunkie
Hartford. CT — Connecticut’s two major public-sector pension systems continued to strengthen this year, with new actuarial valuations showing rising assets, shrinking unfunded liabilities and another round of surplus-driven deposits that state officials said are changing the state’s long-term fiscal trajectory.
The latest valuation for the State Employees’ Retirement System shows actuarial assets grew by more than $2.3 billion, lifting the funded ratio from 55.2% to 59.6% and reducing the unfunded liability from $19.2 billion to $17.6 billion.
The Teachers’ Retirement System, released earlier this month, added over $1.6 billion and reached a 63.7% funded ratio.
Both plans posted a 10.14% investment return — exceeding their 6.9% assumption for the third consecutive year — building on an 11.5% return the year before and 8.5% the year before that.
Treasurer Erick Russell said the results showed the cumulative effect of meeting required contributions and directing volatile revenue surpluses into pension debt. Connecticut, he said, went “about seven decades of not making required contributions” before the shift toward discipline, and has now made “over $10 billion in additional contributions” since 2021.
Unfunded liabilities, long a central strain on the state’s balance sheet, are now moving in the opposite direction, Russell said.
A decade ago, the systems held $30 billion in assets and hovered around 30% funded; today they hold $68 billion and are roughly 62% funded combined. Last year’s returns added nearly $6 billion, he said, and the state has set aside another $500 million to cushion against federal fiscal uncertainty.
Gov. Ned Lamont said the improving pension outlook is giving Connecticut a buffer against national economic volatility. But he warned that the state’s tax structure remains highly sensitive to swings in capital gains, noting that over half of Connecticut’s recent revenue surge came from seven stocks — exposure that could unwind quickly in the kind of downturn that followed the dot-com bust or the 2008 financial crisis.
“You can’t take this for granted,” Lamont said, arguing that Connecticut must avoid pairing “long-term obligations with short-term, volatile revenues.”
Lamont said stronger reserves and healthier pension ratios are already lowering borrowing costs, pointing to a recent $1.5 billion transportation bond sale that Russell called one of the state’s strongest. Since 2018, Connecticut’s general obligation ratings have climbed from A1, A, A+ and AA- to Aa2, AA-, AA and AA+, saving taxpayers millions.
State Comptroller Sean Scanlon speaks about the state pension fund in Hartford, CT on Dec. 12, 2025. Credit: Karla Ciaglo / CTNewsJunkie
Comptroller Sean Scanlon said the difference between today and the period before the state adopted fiscal guardrails in 2017 is stark.
At that time, Connecticut maintained reserves of about $200 million. Today, the Rainy Day Fund stands at $4 billion, placing Connecticut among the strongest state reserve positions in the country, he said.
Scanlon said the roughly $10 billion in recent deposits will save taxpayers $18 billion over the next two decades by reducing annual payment obligations. Without those deposits, he said, the current budget would require roughly $850 million more for pensions.
“This is about freeing ourselves from the bad decisions that were made for 70 years,” he said. Pension stability, he argued, creates room to confront affordability pressures and prepares the state for broader economic disruption — including concerns raised in markets about a potential AI-driven asset bubble.
Newly appointed OPM Secretary Josh Wojcik said slower growth in pension costs is beginning to ease pressure on the rest of the budget, reversing decades in which rising liabilities “pushed other things off the table.”
But the valuations also show the demographic pressures still shaping long-term costs: a surge in retirements, longer life expectancy, and a smaller active workforce. Officials said the state has 1,400 fewer teachers than a year ago — a trend that increases liabilities even in strong investment years.
Asked about Connecticut’s total long-term obligations, officials estimated the figure at $76.7 billion, including bonded debt, pensions, and retiree health liabilities. Actuaries currently project full funding of the major pension systems by 2048, though Russell said stronger returns and future deposits could accelerate the timeline.
House Minority Leader Vincent Candelora, R- North Branford, said the improved ratios do not “negate Connecticut’s long-term debt obligations” and argued that any new budget capacity should be used for property-tax relief, not expanded state spending.
Democratic leaders countered that the guardrails were intended to build stability precisely so the state could begin addressing chronic underinvestment in education, housing, child care and social services.
Lamont said the administration would continue pushing for an “honestly balanced budget,” noting that health care costs rather than pensions are now the fastest-growing pressure on state finances.