State Employees Targeted As A Liability During Greenwich Economic Forum
Connecticut’s public sector employee unions took a beating Sunday during a forum at the Greenwich Public Library.
“The most important way we can get our hands around slowing the spending in our state is by reforming public sector compensation,” Carol Platt Liebau, president of the Yankee Institute for Public Policy, said to a smattering of applause from the more than 200 gathered for the event.
The forum was sponsored by the Greenwich Economic Advisory Committee, but the Yankee Institute helped put together the panel that was moderated by Larry Kudlow, an economist and CNBC commentator. Representatives of labor weren’t in attendance and weren’t on the panel.
To make her point about public sector compensation, Liebau pointed to a report the Yankee Institute commissioned that found a sampling of Connecticut state employees receive total pay and benefits from 25 to 46 percent higher than comparable private sector employees.
“When you look at the part of the budget that’s growing the fastest that also relates to public sector compensation,” Liebau said. “Last year, the state payroll increased by 4.5 percent.”
A recently released report from the nonpartisan Office of Fiscal Analysis found payroll for state employees will increase 6.9 percent in 2018.
But payroll increases are not the biggest contributor to the state’s fiscal instability.
She said there’s also the unfunded pension liability and unfunded health benefits for retirees.
As of 2014, the State Employees Retirement System had a funded ratio of 41.5 percent. The unfunded liability of the health benefits for state employee retirees was estimated at $19.5 billion in 2013. New numbers are expected in the spring.
Asked if public sector unions are really the problem in Hartford, Suzanne Bates, the policy director for the Yankee Institute, said the union fights hard to elect the people they end up negotiating with so “they’re negotiating across the table with themselves.”
She said that adds another layer to the complexity of the state’s budget issues.
“It’s harder to convince the powers that be in Hartford that tackling public sector compensation is the way to go,” Bates said.
Ned Lamont, a Democrat who lost the 2010 primary to Gov. Dannel P. Malloy, said he blames governors going back a generation for the state’s current fiscal woes.
“What you really need are strong governors who really make the difference,” Lamont said.
He said the problem is not the current employees. It’s the pension for employees hired before 1984. The state did not “set aside a dime” for those employees and the lack of funding caught up with it.
“You had governors promising health care benefits, promising pension benefits that they knew their successors couldn’t pay off,” Lamont said. “. . . And we let that happen.”
Lamont said the good news is that the state has begun setting aside more money for pensions and health care, so the state is on more solid footing with active employees.
He said it’s a little “conspiratorial” to say everyone is “bought and paid for” in the legislature. But he didn’t hold back about his feelings regarding Malloy’s decision in 2011 to extend the contract for state employee health and pension benefits until 2022.
“I think we need some governors with backbone. We haven’t had that for a long time,” Lamont said.
He said Connecticut’s governors have negotiated the state in circles for the last 30 years mainly “because the governor is trying to buy votes.”
The statement received applause and a kudos from Kudlow.
Aside from strong leadership, Kudlow asked Sen. L.Scott Frantz, R-Greenwich, who was the only person on the panel holding an elected office, what path he would take to solve it.
“Mathematics and the clock are working against us in a dramatic fashion,” Frantz said. “So we have to come together.”
He said they are hopeful the bipartisan budget negotiations will come up with some longer term structural changes that make sense.
However, he doesn’t anticipate “major restructuring of pension plans” to come of out of budget negotiations.