Connecticut Pension Fund Sees Substantial Growth

In recent years, the stock market has been on an impressive upswing, leading Connecticut’s pension fund to soar to $76 billion. This growth offers a welcome relief to state employees and retirees who have been grappling with prolonged underfunding.

According to state treasurer Erick Russell, the fund experienced a significant 15% increase during the 2026 fiscal year, adding $11 billion within just one year. When the fiscal year concluded on June 30, the fund had a total of $73.7 billion, but it has continued to rise since then.

The latest figures reflect a remarkable recovery from previous years when the pension fund was only 35% funded. For nearly 70 years, past governors and state legislatures struggled to adequately contribute to the funds. Officials now anticipate that pensions could soon approach 70% funding.

Russell noted, “For a long time, it was very much a drag on the state. Yes, we’re in a moment in time where the market is very strong. But if you look at us compared to our peers, it really shows the progress that we have made. We yet again ranked in the top 25% of performers across the country.”

In the recent past, the fund saw an increase of 10.14% last year, 11.5% in the 2024 fiscal year, and 8.5% in 2023.

Governor Ned Lamont, a seasoned observer of the stock market, is aware of its ups and downs and is hesitant to make future predictions. He acknowledges the impressive growth but remains cautious.

It’s interesting, isn’t it? A relatively small group of stocks, dubbed the Magnificent Seven, have driven much of this market surge, thanks to heavy investments in artificial intelligence – which many view as a pivotal industry for the future. Yet, Lamont, 72, has experienced various market fluctuations over the decades.

“I think it’s scary right now,” Lamont mentioned when asked about potential market risks. “You take out AI and all those enormous investments there. That represents 20 stocks, maybe 15 stocks. The rest of the market is doing okay, but not nearly as robust as the numbers might suggest. I have to factor that in; the volatility of our revenues is incredible. It’s important to ensure that if the stock market drops, we remain in a solid position. That’s part of why our $4.5 billion rainy day fund is crucial.”

When pressed about whether he believes there’s an AI bubble forming, Lamont responded, “It reminds me a little bit of the internet bubble from 25 years ago. But I’m a guy that is trying to manage the Connecticut state budget now, so I’m going to stay within my lane.”

This statement brings to mind the internet crash when the tech-heavy Nasdaq peaked in March 2000, only to drop nearly 80% afterwards. The market remained stagnant for about 15 years before finally recovering in 2015. In contrast, the Nasdaq has recently set new records, exceeding 27,000 this June, a notable leap from its 2000 peak.

Lamont reflected on the past market volatility, especially the major downturns from the Great Recession in 2008 and 2009. “It’s been an extraordinary eight or ten years for the stock market,” he said.

State Senator Ryan Fazio, Lamont’s rival in the governor’s race, supports Russell’s strategy of increasing Connecticut’s investment in U.S. equities, which had been lacking previously. However, he expressed that the treasurer should share fiduciary responsibilities rather than holding sole authority.

Russell clarified that he sees himself as a “principal fiduciary,” though he does retain significant influence over the investment strategies of various funds.

Currently, the state pension money is diversified as follows: 51% in global stocks, 17% in bonds, and 12% in private equity. Other allocations include 6% in real estate, 6% in private credit, and 3% in a “liquidity” fund that yielded 4% interest in the last fiscal year, with less than 2% in hedge funds. It’s worth noting that despite only about half of the portfolio being in stocks, the overall return of 15% includes performance across all asset classes. The S&P 500, a widely monitored index, posted a 20.74% return from July 1, 2025, to July 1, 2026.

Over the last four years, the S&P 500 gained 95%, while the state pension fund increased by around 53% based on available statistics.

Pension History

The evolution of the pension fund represents a stark contrast to its previous state.

The recent success signifies a significant shift, given that Connecticut was once ranked as having the second-worst pension fund nationally, according to a Yale School of Management study. The annualized return from 2017 to 2022 was only 5.8%, less than half of that in Washington, the top performer, with Connecticut placing just ahead of South Carolina.

This prompted the legislature’s tax-writing finance committee to convene a forum in 2024, where both parties acknowledged their failure to provide adequate oversight during years of underperformance. State Senator John Fonfara of Hartford admitted the legislature, along with the Investment Advisory Council, had not adequately monitored the treasurer’s office in the past.

Lawmakers called out the fund’s past lackluster performance, including being the sole public pension fund to record losses in 2012. Much of the issue stemmed from one significant problem: a high turnover rate in key leadership positions – particularly with 10 different chief investment officers in just 12 years.

Jeffrey A. Sonnenfeld, a prominent academic and senior associate dean at Yale, evaluated all 50 states and declared that Connecticut has indeed made commendable progress under Russell’s leadership since he took office in January 2023.

“It is breathtaking,” Sonnenfeld stated to lawmakers in 2024. “We’ve come a very long way. We wouldn’t say mission accomplished just yet, but I wouldn’t have anticipated we would be where we are.”

He also added, “The pension funds are certainly heading in the right direction. … There’s still more work to do, though.”

Regarding the prior turnover, a notable instance from 2018 occurred under then-Treasurer Denise Nappier, when new chief investment officer Sean Crawford resigned after just 10 days in the role. Crawford had been touted as an outstanding investment manager prior to his hiring.

Nappier described the incident as “unfortunate” and extended her best wishes to Crawford for his future endeavors. His replacement didn’t last long either, leaving the treasurer’s office within three years.

Series of Funds

While typically referred to as a single pension fund, it actually consists of six distinct funds and 13 trusts, serving around 240,000 state and municipal employees, teachers, retirees, and survivors. Different groups, like state employees and judges, have separate pension plans.

Steven Tian, a Yale researcher collaborating with Sonnenfeld, observed in 2024 that proper management could have led to significantly larger pension funds. He pointed out that traditional index funds often outperformed the state’s well-compensated investment managers.

“Connecticut missed the bull run in stocks,” Tian remarked, referring to the period before 2024. “We completely missed it. … Connecticut would have had many billions more. … The state had a tendency to double down on poor investments. … It’s ironic that public employees and teachers might have outperformed by managing their investments independently.”

Since then, there have been three increased gain periods above 10% over the last three years, culminating in the impressive 15% increase for the recently concluded fiscal year.

Largest Pension Over $400,000

As the stock market has surged, data indicates that numerous retired state workers are receiving six-figure pensions, with that number climbing each year due to cost-of-living increases.

Currently, the top five retired employees are collecting over $300,000 annually. With annual cost-of-living adjustments ranging from 2.5% to 6%, their payments have seen consistent growth.

For the first time in history, a state employee is now receiving an annual pension exceeding $400,000. This record belongs to John F. Veiga, a former UConn business professor. His pension has steadily increased due to COLA, amounting to nearly $382,000 in 2023 and an additional $193,000 in the first half of 2024. The COLA adjustments pushed his total above $400,000 for 2025.

Veiga spent 37 years teaching at UConn and led the management department for 26 years. The second-highest pension goes to Dr. Jack N. Blechner, at $364,000 annually. He is a former UConn Health professor and the past chair of the obstetrics and gynecology department.

Unlike many private sector retirees, state employees are not locked into a fixed pension amount for life; annual COLA increases significantly impact their benefits. Blechner, for instance, has received over $157,000 more in 2024 than he did 19 years ago.

Pensioners earning above $300,000 also include Dr. Edward A. Blanchette, ex-clinical director at the Department of Correction; longstanding UConn psychology professor Jeffrey D. Fisher; and ex-UConn president Harry J. Hartley. Richard L. Judd, who previously served as president of Central Connecticut State University and passed away at 89, also exceeded the $300,000 mark in 2025.

Hartley once defended his sizable pension, expressing opposition to any attempts to eliminate annual COLA increases. “No, no, no,” he stated during a phone call from his retirement home. He emphasized the importance of such protections for union members.

Hartley attributed the pension funding issues to legislative shortcomings in the past. “The problem wasn’t the pensions,” he explained. “The problem was they didn’t fund them properly.” When discussing his own pension, Hartley described it as “well deserved.”

Looking ahead, Russell aims to ensure sustainable results for state employees and educators. “What’s most important about these results is that we’re not short-term investors,” he emphasized. “We’re not trying to time the market. We’re building a solid foundation that’s meant to last.”