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## Introduction – Part I

Earlier this year, Reviewing Fairfield County Municipal Fiscal Indicators Since 2001 looked at data from 17 annual Connecticut Municipal Fiscal Indicators reports to better understand the current financial condition of all 169 towns. Those reports included only began including the net pension liability over the last three years and had no OPEB data. It turns out that the same disclosure by the Office of Policy Management includes separate tables for pension and other post employment benefits (OPEB). This post will be the first in a two-part series to explore the evolution of aggregated unfunded liabilities and financial vulnerability of Connecticut municipalities over time. Note that these liabilities are distinct from the State of Connecticut SERS and TRS pension funds which are even larger.

In the second post Replicating Yankee Institute Risk Score over 15 Years, we will take this and other municipal financial data, and replicate the analysis in Yankee Institute Warning Signs: Assessing Municipal Fiscal Health in Connecticut as closely as possible. In that report, intensive analysis was conducted using CAFR data to build a 2016 snapshot risk score for each town based on five factors combining financial statement and macroeconomic data to look at vulnerability to default. The risk score was based on research by Marc Joffe of the Reason Foundation studying attributes leading to municipal default experience during the Great Depression and subsequently which will be discussed in more detail in Part II. We will take the analysis a step further to calculate the evolution of municipal vulnerability for 115 towns since 2004.

# Case Study: Bridgeport vs New Haven Pension Analysis

In Figure 1 below, we have aggregated every municipal pension fund by town from 2004 until 2017 (excluding 2011 which was not available in digital form). The table includes: actuarial-required and made contributions, gross pension liability, pension net assets, Assumed Rate of Return and net pension liabilities. It is possible to look for your town by typing the name in the Municipal search field c below to bring up the relevant data. It also can be sorted from largest unfunded or by towns making the smallest contributions relative to actuarial requirements.

For example, typing “Bridgeport” into the filter, it is possible to see that actual contributions were significantly lower than actuarial required contributions in every year, and reported pension net assets declined from $404 million in 2004 (14% underfunded) to just$169 million today (63% underfunded). It is also surprising how slowly Bridgeport’s liability has grown, but the number of covered employees has declined by over half during the period. With less than 1,000 retirees, it has about 1/3 as many covered employees than Stamford, which has a similar population. Unless pensioners in Bridgeport’s four pension funds are dying off at a astonishing rate, it looks like something else is going on here. The city did a pension bond transaction during 2016 which may partly explain the decline in covered participants, but the true liabilities are likely to be higher than reported in these numbers.