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Politics & Government

New treasurer scores victory

Erick Russell helped secure approval of Baby Bonds; now takes steps to improve pension fund investments

Scott Benjamin, Community Contributor

Posted Sun, Jul 9, 2023 at 2:28 pm ET

By Scott Benjamin

HARTFORD – Lou Holtz – the famed former Notre Dame football coach – has said, "Life is 10 percent what happens to you and ninety percent how you respond to it.”

Three days before Erick Russell was sworn in as state treasurer this last January, Katy Golvala and Ginny Monk of CT Mirror reported that, “nearly a year and a half after CT Baby Bonds was signed into law, it has yet to become a reality — largely because of political interference from Gov. Ned Lamont’s office.”

Find out what's happening in Brookfieldfor free with the latest updates from Patch.

The program had been approved in 2021 under then-state Treasurer Shawn Wooden of Hartford.

According to a Connecticut government news release, “Connecticut Baby Bonds invests $3,200 on behalf of each child whose birth is covered by HUSKY. Those funds will grow over time. When participants become young adults, and complete a required financial literacy course, they can use the funds to buy a home in Connecticut, start or invest in a Connecticut business, pay for education or job training, or save for retirement. An estimated $11,000 and $24,000 will be available to each participant, depending on when the funds are accessed.”

Find out what's happening in Brookfieldfor free with the latest updates from Patch.

“This is about kids being born into poverty,” Russell said in a recent interview with Patch.com. “It is about creating economic opportunity and investment in communities that may have been historically underinvested in. It has the potential to impact tens of thousands of kids growing up in Connecticut. We have one of the largest wealth gaps.”

The Center on Budget and Policy Priorities has reported that, “After decades of widening inequality, Connecticut's richest households have dramatically bigger incomes than its poorest households. The richest 5 percent of households have average incomes 14.1 times as large as the bottom 20 percent of households and 4.9 times as large as the middle 20 percent of households.”

Golvala and Monk of CT Mirror reported this last January that, “The governor and his spokesperson did not say specifically why they supported [Baby Bonds’] delay, but administration officials told the CT Mirror that, along the way, they objected to how Wooden structured the program’s funding, which included an ‘automatic authorization’” for its bonding that they claimed sidestepped the governor’s authority as chair of the State Bond Commission. The administration also said agency heads from the Department of Social Services and the Office of Policy and Management had concerns about the program’s implementation.”

However, state Rep. Bob Godfrey (D-110), who was initially elected in 1988, said in a phone interview with Patch.com, “I have never understood why Gov. Lamont was not fond of the program.”

Mike Savino of CT News Junkie has reported that during the recent legislative session Russell “addressed Lamont’s concerns” about funding, “using $381 million that had been set aside in a reserve fund when the state borrowed money to help fund the pension program for retired teachers. The reserve fund was meant to cover any missed payments, but the state can now afford to buy insurance for that purpose.”

Russell said that “it took lot of political courage” for Lamont and the General Assembly to approve the plan because usually elected officials enact plans that would benefit [residents] in the short term.”

Godfrey noted that Russell also went on a publicity tour.

“Erick understood that you can’t sit and watch, you have to engage people,” he explained. “He used his organizational skills. He generated grassroots activity and it produced results.”

Hugh McQuaid and Savino of CT News Junkie designated Baby Bonds as one of the “Winners” for the 2023 legislative session.

Economist Darrick Hamilton of The New School for Social Research recently told Ezra Klein of The New York Times that, “Ultimately, wealth gives you choice in ways that income does not.” Hamilton and William Darity, an economist at Duke University, introduced Baby Bonds more than a decade ago.

Russell remarked, “I’m really proud of what we’ve been able to do here in Connecticut and be the first state in the country to pass this,”

His family moved to “a tough neighborhood” in New Haven in the 1980s “when drugs were at their height in many ways.” He became the first in his family to graduate from college.

Russell said that in each of his recent presentations before rating agencies, Baby Bonds has been discussed.

“They see our commitment,” he explained.

State Sen. Stephen Harding (R-30) of Brookfield said in a phone interview with Patch.com that Baby Bonds will make it “more enticing for families to come here and raise their families here.”

Godfrey remarked, “It is an experiment. It will take 20 years to see if it actually works. But it is worth trying.”

Perhaps some people were saying the same thing about the Connecticut High Education Trust (CHET) when it was established 26 years ago to help families pay for college.

According to Connecticut By The Numbers, CHET “has grown to more than $3.5 billion in assets and 132,000 accounts. Over $2.1 billion has been withdrawn from CHET accounts through the years to help more than 57,000 students pay for college expenses.”

Said Russell, “We will continue to market [CHET].”

In the space of less than a decade, Russell has gone from law school graduate to state treasurer.

In a phone interview with Patch.com, Audrey Blondin of Goshen, the secretary of the Democratic State Central Committee, said, “We had changes in the party leadership after Lamont got elected in 2018 and when Eric became vice chairman, I did not know him and I don’t think many people outside of New Haven knew him. But almost immediately I can’t think of anyone I’ve been more impressed with. He is extremely smart, level-headed, compassionate and can see the big picture.”

Russell is the first openly gay African American to be elected to statewide office in the United States. His husband is former state Rep. Chris Lyddy, who had represented the 106th District, which largely centers around Newtown.

Russell ran for the Democratic nomination after Wooden announced five weeks before the 2022 nominating convention that he would not seek a second term. Russell annexed the convention nod and then outpolled two rivals in an August primary. Then he defeated Republican state Rep. Harry Arora of Greenwich, a former hedge fund manager and former congressional candidate, in the general election.

A graduate of the University of Connecticut’s law school who had been an intern in former Gov. Dannel Malloy’s (D-Essex) legal department, he was working as a bond attorney, representing municipalities and state agencies before the treasurer’s office.

Blondin commented, “He knew the job of treasurer through his work, but what also set him apart was that he had the political acumen to get successfully elected. He has the ability to listen. He would not be where he is now if it wasn’t for his ability to listen.”

Russell said his interest in government largely came from one of his Criminal Justice professors at the University of New Haven, then-state Rep. Mike Lawlor, who would later work in the Malloy Administration.

"He invited me up to the capital where they were debating a bill to abolish the death penalty,” Russell recalled. “I caught the bug from it. It is why I started to get involved in politics.”

Russell said his Criminal Justice courses taught him about, “The need to have people involved in law enforcement to understand the communities that they are serving.”

State officials have been discussing how to pay off pensions since at least 2015 when a report written by Jean-Pierre Aubrey and Alicia Munnell of Boston College stated that Connecticut has large unfunded liabilities.

CT Mirror budget reporter Keith Phaneuf has said that the pensions for the workers in the state employee collective bargaining units was structurally underfunded every year from 1939 through 2010.

A report from Yale University researchers Jeffrey Sonnenfeld and Steven Tian in May stated that “billions of dollars were lost on terrible investments—investment errors that 49 other states somehow avoided. Connecticut’s previous treasurers provided this state, consistently, with one of the single worst investment track records of all 50 states.”

The state has about $40 billion in pension funds to invest.

Russell said his office began addressing the pension fund performance before the report was distributed and has since spoken with Sonnenfeld to get input. He added that the treasurer’s office has already gone “through an asset allocation study.”

Phaneuf of CT Mirror, has reported, “In an effort to address these issues, Sonnenfeld and Tian put forth five reform recommendations in an editorial this month: careful and accountable asset manager selection, revising the asset mix, considering a shift to more low-cost index funds, increasing performance transparency, and enhancing talent recruitment for the treasurer’s team. The two authors credited current leadership, including state Treasurer Erick Russell and the Connecticut Investment Advisory Committee, for beginning to implement some of these changes.”

Russell said that his office has helped craft legislation to address the issues.

There were restrictions in place that prevents some investment people to be on because of ethical concerns,” Russell said. “This would clear a lot of that.”

State Sen. Ryan Fazio (R-36) of Greenwich said in a phone interview with Patch.com that he appreciates Russell’s efforts but believes a special session of the General Assembly should be called to enact legislation that would make changes in fiduciary decisions that would be permanent.

He said the Yale report indicated that over the last 10 years the pension investments have underperformed by about $27 billion.

“This is something that should be acted on as fast as possible,” remarked Fazio.

“The average household has had to pay $3,000 in taxes to finance the poor investment returns,” he declared. The state “historically has failed to dispense of or dismiss portfolio managers that are severely underperforming.”

In an e-mail statement to Patch.com, Russell stated, “My focus is on strengthening the membership of the Investment Advisory Council, the board that already shares responsibility for Connecticut’s investment strategy and performance, and recruiting and retaining highly skilled investment professionals within my office. Although it doesn’t lend itself to political gamesmanship, quality and continuity of leadership and key personnel are the common denominators among the highest-performing pension funds.”

He continued, “Since taking office at the start of this year, we’ve taken several significant steps in that direction. Unfortunately, there is no silver bullet that will maximize our investment returns; it requires a lot of hard work and good decisions over a long period of time. I’m confident we’re on the right path and, if we maintain that focus and commitment, we will find ourselves in a much stronger position in the coming years.”

The pensions for the workers in the state employee collective bargaining units are currently 48.5 percent funded, an improvement over the 29 percent cited in the March 2018 report from the state Commission on Fiscal Stability and Economic Competitiveness.

Generally speaking, fiscal and government officials consider 80 percent to be the desired level of funding.

The Wealthy Nickel online niche journalism web site has reported that Connecticut has $10,647 of debt per capita, the second highest in the nation, behind Massachusetts.

Russell said the state has benefitted from the fiscal guardrails that were approved in 2017, which, among other things, directs some surplus revenues toward paying down the pension debt

Following the 2017 negotiations with the state employee collective bargaining units, some Republican legislators complained that although the new hires were to be placed in a hybrid benefits plan, they would have preferred that they receive an even less expensive defined contributions plan. They noted that defined contributions has become more common in the private sector.

Should the state seek to place the new hires into defined contributions?

“I don’t think that is the case,” Russell said, indicating that the high pension liabilities are primarily due to errors made during previous generations.

During the 2022 campaign, Russell called for greater financial literacy in the state.

There is a report that nationally only one out of six students graduate high school with a course in personal finance. Yet, Business is by far the most popular college major.

Russell said the biggest step forward is a requirement, which was authored by state Rep. Corey Paris (D-145) of Stamford, is that students in the public high schools must complete a financial literacy course to graduate.

Additionally, Russell said that he and state Comptroller Sean Scanlon (D-Guilford) have traveled to high schools for talks on financial literacy.

Also during the race last year, Russell proposed a Safe Harbor Fund, which would offer financial assistance “to those who travel to Connecticut for legally protected abortion care and includes a plan to partner with State Treasurers in pro-choice states across the country to form a nationwide coalition of states providing safe and legal abortion care in a private and affordable manner,” according to a campaign news release.

In the interview, Russell said the need for such a program has increased as a result of the June 2022 Dobbs v. Jackson decision by the U.S. Supreme Court, which has restricted abortion access.

He said “so many women – most with less means – do not have the resources to leave an anti-choice state.”

Russell said that state Reps. Jillian Gilchrist (D-18) of West Hartford and Matt Blumenthal (D-147) of Stamford led efforts during the recent session of the General Assembly on the issue.

He said the program was not fully implemented during the 2023 session, but that supporters “will continue to look at it.”

Which public officials does Russell most admire?

He said that Lawlor, his former professor, is at or near the top of the list for “his ability to be openly gay and be his authentic self while being in this important role.”

He also named former Democratic state Rep. Joe Grabarz of Bridgeport – the first openly gay state legislator in Connecticut – and state Supreme Court Justice Andrew McDonald of Stamford, a former state senator who also is openly gay.

Russell said that as an African-American, at the top of his list of federal elected officials is Democratic former President Barack Obama.

He commented that his father, who is 81 years of age, “never thought” he would see an African-American in the Oval Office.

Resources:

Interview with Erick Russell, Patch.com, Monday, June 26, 2023.

Interview with Stephen Harding, Patch.com, Thursday, June 29, 2023.

Phone interview with Ryan Fazio, Patch.com, Friday, June 30, 2023.

Phone interview with Audrey Blondin, Patch.com, Monday, July 3, 2023.

E-mail statement from Erick Russell, Patch.com, Monday, July 3, 2023.

Phone interview with Bob Godfrey, Patch.com, Thursday, July 6, 2023.

https://ctmirror.org/2023/05/16/ct-baby-bonds-compromise-erick-russell-ned-lamont-shawn-wooden/

https://ctmirror.org/2023/01/01/ct-baby-bonds-money-ned-lamont-shawn-wooden/

https://ctnewsjunkie.com/2023/06/21/from-baby-bonds-to-bongs-a-fresh-batch-of-laws-set-for-july-1/