NAUGATUCK — The borough finance department estimates it will need nearly $17.1 million for pensions and insurance next fiscal year, up almost $896,000 from this year.
The figure, which Controller Wayne McAllister and the finance department presented to the Joint Boards of Finance and Mayor and Burgesses last week, represents a 5.5 percent increase over this year’s budget.
Borough officials expect to spend nearly $8.6 million on pensions and close to $8.5 million on insurance next fiscal year. This year’s pensions and insurance, excluding the school system’s health insurance costs and state-funded pensions for many certified school employees, make up 15.6 percent of the borough’s overall budget.
Health insurance premiums have been increasing nationwide in recent years, and pension costs for the borough have done the same as more employees near retirement. Last year, the borough’s pension costs increased drastically after the economic downturn led to a drop in the return on invested pension funds.
“We cannot sustain the level of benefits that we provide to our employees,” Mayor Robert A. Mezzo said.
The increased costs to the borough might have to be absorbed next year through increased taxes, cutting municipal services or layoffs, Mezzo said.
Pension and insurance costs will continue to increase beyond the borough’s capacity to afford them unless certain provisions in union contracts are changed, Mezzo said. New hires in five of the borough’s seven unions now are now in defined contribution pension plans, which require employees to contribute to their own retirement funds. The two biggest unions, police and fire, have not made the switch.
The borough also switched health insurance carriers last year from Anthem Blue Cross and Blue Shield to Cigna Insurance, but Mezzo said employees need to pay more toward their insurance as a long-term solution.
Even if all Mezzo’s desired changes occur according to plan, the benefits will not be immediately felt, he said.
“It could take 10 years, it could take 15 years,” he said. “I don’t think it will be a quick process.”
The police union is not formally negotiating with the borough over defined contribution pensions, but the issue has come up informally, said Sgt. Bryan Cammarata, the union’s president.
“I absolutely wouldn’t say that we’re totally opposed to it,” Cammarata said. “I’d definitely like to sit down and find something that will work for both sides. … We want to see that the new employees coming in have a good retirement.”