OLR Bill Analysis

sSB 375

AN ACT AUTHORIZING BONDS OF THE STATE FOR LOANS TO MUNICIPALITIES FOR EMPLOYEE PENSION FUNDS.

SUMMARY:

This bill authorizes $ 250 million in state bonding to fund the municipal pension solvency loan program. By law, the program is authorized to lend money to municipalities for their unfunded employee pension liabilities.

EFFECTIVE DATE: July 1, 2009

BACKGROUND

Pension Loan Fund Program

By law, loans issued under this program must carry the same interest rate the state pays on the bonds, notes, or obligations it issues to fund the program. Loan agreements must contain penalty provisions for municipalities that fail to (1) repay the loan on time or (2) contribute to their pension funds as required under the agreement. The agreements must also require repayment of the administrative costs associated with the loan program. The state treasurer or the Office of Police and Management secretary may require credit enhancement provisions, as they deem necessary, to be included in the loan agreement.

The treasurer and the secretary must establish a priority list of eligible towns and a ranking system for making the loans. They must consider, among other things, the amount of a municipality's unfunded pension liability and whether the loan can eliminate or substantially eliminate the liability.

If a municipality fails to appropriate the required actuarially recommended pension contribution, such an amount will be deemed appropriated by the municipality, regardless of any other state law, charter, special act charter, or local ordinance.

COMMITTEE ACTION

Planning and Development Committee

Joint Favorable Substitute