The agreement to save money on state employee compensation negotiated by Gov. Dannel Malloy and the State Employees Bargaining Agent Coalition last year will save $3.5 billion over 20 years, according to the latest actuarial valuation, less than half of the $8.3 billion estimated by the administration last year.

According to documents released last year when the concession package was first negotiated, the state expected to contribute $42.4 billion to the State Employee Retirement System over the next 20 years.

According to the administration, the agreement would save the state $8.3 billion or about 19.6 percent over that period.

Based on the 2011 actuarial valuation, the state instead saved $3.5 billion or 8.3 percent over 20 years. (View the data here.)

Spokesmen for Malloy and OPM did not respond to requests for comment.

House Minority Leader Larry Cafero, R-Norwalk, said the legislature asked Malloy last year to show how he would reach the savings targets in the negotiated agreement.

“We still do not have that verification,” Cafero said.

“If we are not armed with that information, we cannot do anything about it,” he said. “That would be the greatest sin of all.”

Previously, the short-term savings on state health care benefits did not match projections and the Office of Fiscal Analysis reported Wednesday the state is on track for a deficit because of these and other missed savings targets. Moody’s recently downgraded Connecticut’s bond rating and cited pension costs as one reason for its decision.

At the time the deal was made, the top union negotiator said it was the best in the country. He later accused the Yankee Institute, publisher of this website, of illegally misusing state computers in a letter to Attorney General George Jepsen, who found no evidence of wrongdoing.

The pension savings caused by the SEBAC agreement are probably less than $3.5 billion because the actuarial valuation also takes into account a 20.75 percent return on pension-fund investments in the last fiscal year. Part of this outsized return – the state only expects to earn 8.25 percent a year – went toward reducing future payments.

Malloy’s proposal Monday to change the schedule of pension funding reduces the 20-year total contribution by another $5.8 billion, for a total reduction of $9.3 billion or $1 billion more than originally expected from the SEBAC agreement.

The proposal also has the advantage of avoiding massive payments that would be needed two decades from now under the current plan.

In calculating how much the state would save over 20 years, the administration last year gave a dollar today the same value as a dollar 20 years from now. However, based on the 8.25 percent discount rate used by SERS, saving a dollar 20 years from now is worth only 18 cents today.

Discounted this way, administration projections showed the concession agreement saving 18.2 percent. The actuaries found the savings were only 9.5 percent.

Malloy’s proposal this week increases the savings by only .8 percentage points, for total savings of 10.3 percent. In other words, when discounted at the state rate, the new plan falls 7.9 percentage points short of the original projections.

The savings projected last year amounted to $3 billion on total spending of $16.7 billion when discounted at 8.25 percent a year, while the after the new proposal the savings are projected to be only $1.7 billion.

Financial economists criticize the discount rates used by SERS and other pension funds as too high. Using a lower discount rate, say 4 percent, the savings under Malloy’s new proposal are closer to the original SEBAC projections.

On 20-year spending of $26.3 billion the original projections would save $5 billion or 18.9 percent. The real savings of the SEBAC agreement amounted to 9 percent. Under the new plan, the state will save about 16.3 percent.

Republican Sen. Andrew Roraback of Goshen proposed a separate set of pension reforms Tuesday that would save an unspecified amount of money.

Roraback is a candidate for U.S. Congress in Connecticut’s Fifth District.

Last year, actuaries working for the Malloy administration and his Office of Policy and Management provided savings estimates for six proposed changes to the pension plan.

However, it appears the administration added all of these savings without taking into account how one saving changes another.

For example, if a shopper uses a 10-percent-off coupon and a buy-one-get-one-free coupon on the same purchase, the savings from both coupons is less than the sum of what each coupon would have saved by itself.

In the same way, creating a new tier of pension recipients with reduced benefits reduces the value of, for example, changing the early retirement penalty.

Update: Senate Minority Leader John McKinney, R-Fairfield, said last night, “After passing the largest tax increase in state history, Democrats have still managed to spend us into deficit. Among other things, today’s projections confirm that the labor deal Governor Malloy cut with state employee unions will not yield the savings he promised taxpayers.”

According to McKinney, up to $41.7 million of additional savings recently proposed by Malloy have already been counted.