Here’s my most recent “Hartford Current” piece in The Darien Times:
Our state fiscal challenges continue amid critical budget dynamics. fiscal year ‘16 ended at midnight Thursday June 30 with yet another deficit — this time $318 million. For the third time in a year, the state budget fell into deficit due to a drop in income and sales tax receipts. In total, our budget was out of balance by over $1 billion.
For legislators, the path toward a balanced budget includes important choices:
- Increase revenue – propel the state economy and, thereby, state tax receipts; borrow through bond offerings; increase your tax rates; and/or add new fees
- Cut spending – reduce your services, fees and grants (60% of budget); and/or renegotiate state union salaries and benefits (40%)
Key to our historic ballooning deficit is underfunding of the state employee defined-benefit pension plan that guarantees a return-on-investment calculated at an unrealistic 8% annual rate. To be fair, both Republican and Democratic Parties bear responsibility, as both have paid little attention to this looming dynamic over the years.
Second are contracts with state employee unions. In Connecticut, state government is our largest employer, and nearly all state employees are members of unions that have collective bargaining rights. Their benefits not only far exceed the private sector, but also exceed all other state employees in the country, including New York, New Jersey and Massachusetts. Salaries and benefits now account for 40% of our entire $20 billion annual budget. Well-connected state employee union leaders drive critical fiscal policy coming out of Hartford, and are closely aligned with the Democratic Party.
In a June 1 editorial, the Hartford Courant wrote, “Are CT Democrats Breaking Free of State Unions Grip?”, (http://www.courant.com/opinion/editorials/hc-ed-unions-democrats-0531-20160531-story.html)
and go on to say, “protecting the state’s workers is an admirable mission. But to do so at all costs — even if it means watching the state’s finances buckle under the weight of unsustainable budget growth, the most generous pensions in the nation and some of the lowest pension contributions and drug co-pays — is deplorable.” They note, “Union leaders should be willing to revisit the terms of the contract — and must consider broader constituencies, not just state employees.”
Despite the two record tax increases ($3 billion in 2011 and $1.8 billion in the 2015), our state’s fiscal situation is nowhere near stable. The Democratic majority (the governorship and both legislative chambers) gambled that record tax increases would stabilize our state’s finances after the recession of 2008. Not so. We lag far behind the rest of the country in jobs recovered after the recession (77%) compared to the US average (159%) per CT Business and Industry Associates.
What is perhaps even more disheartening is legislation from this last session that reflects the mindset of the majority party, “An Act Creating the Connecticut Retirement Security Program” (PA 16-29). This law creates a new state entity to administer retirement account programs for private sector employers (with five or more employees) who do not offer their own retirement plans. This makes no sense. Well-regulated financial institutions are already offering these retirement savings programs. And, why would we even contemplate creating another government bureaucracy? No wonder our citizens are frustrated. In the past 5½ years of one-party control, Democrats continue to push policies that have negative economic consequences for our state.
Another example — a policy being re-considered by Democrats is to tax each driver in our state on the number of miles driven each year — a Connecticut mileage tax. On June 28, it was reported Connecticut, as part of the I-95 Corridor Coalition, had applied for a federal grant to launch a pilot program to study a mileage tax. Fifty volunteers each from Connecticut, New Hampshire, Delaware and Pennsylvania will act as testers of this concept. Many of us believe another tax burden is not viable and will only further alienate already frustrated citizens, not to mention be a potential violation of privacy and civil liberties.
The solution to our deficit challenges is not difficult. We simply need to take heed of the dynamics that continue crushing our state finances. Times have changed. We need policies that will propel the state economy forward and retain its citizens, i.e. no more tax rate increases. Yet, we need to retain our basic services and investment in education.
Republican House and Senate caucuses have offered solutions vetted as viable by the nonpartisan Office of Fiscal Analysis, for each state budget over the last four years. Solutions included privatizing some state services such as the DMV, setting more predictability and fairness in tax policy for employers and families, and moving all new state hires from defined benefit to defined contribution 401(k) plans. Lastly, state employee union leaders would be well served to agree to open up the contracts and modify benefits to more closely mirror other states and the private sector.
Together, we can do this — and we must! Our state has so many positives of which to be proud. I strongly believe with both parties at the table, negotiating in good faith, we will return to the prosperous Connecticut of not long ago.
The orginal ran in The Darien Times here: http://www.darientimes.com/71478/wood-hartford-current-return-prosperity-to-our-great-state/