OP-ED | Budget Deficit the Cost of Failure
by Heath W. Fahle | Dec 7, 2012 8:55pm
(5) Comments | Commenting has expired
Posted to: Opinion, State Budget
State Comptroller Kevin Lembo released the latest state government budget figures this week which showed Connecticut’s ledger with $415 million in the red. That figure, $415 million, will be the target of much debate in the coming weeks as the governor and legislators search for enough cash to balance the budget. It should also be seen, however, as the opportunity cost of refusing to reform state government before, rather than during, a crisis.
During the 2010 campaign for governor, then-candidate Dan Malloy took the tough-guy line on taxes and spending. During the NBC Connecticut debate on October 26, 2010, for example, Mr. Malloy said, “I want to be very clear. We’re not raising taxes. That’s the last thing we will do.” It was neither the first nor the last time Mr. Malloy made the statement, yet it should have been recognized for its duplicity at the time.
Few imagined that “the last thing we will do” would arrive so quickly. Gov. Malloy’s 2011 budget address rhetoric held the same ring as the campaign rhetoric, but the words were quite different: “First we downsized government. Then we cut spending. Then we identified what we need to ask state employees to do. Only when those three processes were complete did we begin to look at revenue.”
In this light, it should be discordant to hear the governor pledge that the current deficit would be solved only with spending cuts. Having resorted to tax increases at the end of the last crisis, there should not be anything left to cut now.
If the governor cut everywhere last time, how is there still room to cut? Either he was not being truthful in 2011 or he is not being forthright now.
Salt was poured into the state’s financial wound this week by the revelations that former Board of Regents President Robert Kennedy lived a life of luxury during his short stint on the public payroll.
The thousands of regular people who cautiously divide personal and business expenses, and err on the side of the personal rather than the business, are chagrined to see a person employed by the state to the tune of nearly a half million dollars per annum passing on an $0.80 toll charge and $400 coffee to the business account.
The problem in both cases is Mr. Malloy’s defining weakness as a leader: excluding education policy, his bold rhetoric belies a lack of interest in changing the status quo. All of the theatrical chest beating he does about how much better he is at being governor than Jodi Rell or John Rowland doesn’t obscure the fact that the status quo is sufficient for Dan Malloy. That’s because the status quo is Dannel in charge — and he likes that a lot.
Connecticut needs leaders that are willing to talk about real reform and actually push to deliver on it before the next crisis starts so that it can be avoided. Pension reform, energy reform, health care reform, tax reform, education reform, bonding reform — all of these and more lay waiting for a leader with the will to implement change.
Who will rise to the challenge?
Heath W. Fahle is the Policy Director of the Yankee Institute for Public Policy and a former Executive Director of the Connecticut Republican Party. Contact Heath about this article by visiting www.heathwfahle.com.
Tags: heath w. fahle, Taxes, spending, deficit, Malloy, connecticut, lembo, budget, dh
(5) Comments
posted by: perturbed | December 8, 2012 7:08pm
Excuse me, Heath, but you made one glaring mistake.
This was an interesting and enlightening piece. I largely agree with your assessment. And I certainly don’t defend Malloy.
But in the start of the first sentence of the last paragraph, you made a mistake. Pension reform was accomplished.
As a state employee let me assure you, Malloy exacted more significant structural pension reform than could have ever been imagined in Connecticut. More importantly, Malloy’s deft outmaneuvering of the SEBAC unions is what made it possible. (They wanted to pass a pooling bill, and get a couple of favorable executive orders from Malloy, so they sold us out.) Say what you will about Malloy’s failures, but pension reform is not one of them.
Here’s a re-cap of the SEBAC 2011 pension concessions:
► Raised the normal retirement age eligibility by three (3) years for everyone to from 60 (with 25 yrs, of service) or 62 (with 10 years of service) to 63 or 65—except Tier I and hazardous duty employees—effective July 1, 2022. (In an unprecedented move, this was applied retroactively to all existing employees.)
► Established a new Tier III for new hires that includes: the 2% pension contribution of Tier IIa; the new higher 63/65 retirement ages for non-hazardous duty; higher age/service requirements for hazardous duty—age 50 with 20 years, or any age with 25 years; and benefit calculation for all based on a 5-year average instead of a 3-year average, effective July 1, 2011
► Established a 100% increase (a doubling) of the current penalty for anyone qualified for early retirement—based on the “new normal” age when it takes effect later—from 3% per year to 6% per year early (Add in the standard 1.33% per year reduction for each year early, and foregone raises, and the resulting reduction is close to 9% per year, pretty much shutting the door on early retirement.), effective October 2, 2011. (This was applied retroactively to all existing employees.)
► Established a new Health Care Premium (Penalty) for early retirees, ranging from 2% to 40% of the cost of their health care, depending on years of service and years early, effective July 1, 2011. (This was applied retroactively to all existing employees.)
► Reduced the typical COLA by 20%, effective October 2, 2011. (This was applied retroactively to all existing employees.)
► Established a mandatory 3% wage “contribution” (separate from any direct wage concessions) across the board for all employees for the equivalent of 10 years to be used to pay into a “Retiree Health Care Trust Fund”, phased in over 2 years beginning July 1, 2013. (This was applied retroactively to all existing employees.)
Even in those rare states that implemented more drastic pension reform, pension benefits that had already been earned by existing employees were preserved. Not in Connecticut.
Here’s the Connecticut Republican Party’s wish list from the Common Sense Commitment in effect when Malloy was inaugurated, under the heading, “Spend No More Than You Make:”
• Reform state employee pensions by:
- Requiring state employees to contribute more toward their retirement;
- Calculating retirement income based on a five year look-back, rather than a three year look-back;
- Capping cost of living adjustments at lower levels;
- Creating a defined contribution plan for new state employees;
- Increasing the retirement age for state employees in Tiers II and IIA;
- Eliminating longevity payment amounts and overtime from the pension calculation formula.
• Reform state employee health care plans by:
- Increasing the level of state employee contribution into the Other Post Employment Benefits trust fund;
- Increasing the age that state employees are eligible for retirement and early retirement;
- Making only those state employees who directly go into retirement eligible to receive health care benefits;
- Requiring the age of retirement and time of service to equal 80 years or more, and requiring state employees with less than 25 years of experience to pay premiums on a sliding scale based on years of service;
- Increasing co-pays and premiums;
- Requiring DAS to create a program to incentivize state employees to participate in a wellness program.
• Freeze state employee salaries for 2 years, reduce commissioner and deputy commissioner salaries by 10% for 2 years, and eliminate longevity payments.
So, out of that laundry list, how many reforms did SEBAC NOT hand over to Malloy?
My own anticipated pension was reduced by approximately 20%. I’m left wondering what your vision of pension reform would actually look like, if not the Republicans’ vision.
—perturbed
posted by: Noteworthy | December 9, 2012 9:14am
Spot on. Direct hit. And that sums up our on-going discomfort with the governor. Status quo except it just costs a lot more now.
posted by: Lawrence | December 9, 2012 12:41pm
1. Who is The Yankee Institute going to back? Your Board of Directors does not have a good track record: Jeff Wright, Martha Dean, Tom Foley, Kathering Marx, Rob Russo, Oz Griebel, Win Smith, Bill Aniskovich…John Rowland…
2. The current budget situation (as it applies to potential GOP gubernatorial candidates) should still be viewed in the context of the November elections, and where Republcians failed to appeal to voters. More than half of the CT GOP Senate and a third of the CT GOP House members were endorsed by The Family Institute of Connecticut (not good.) You lost two Tea Party favorites in Len Suzio and Chris Coutu (good for the general public, bad for the GOP.) You have ONE female state senator (7% of the caucus.) White, male and conservative is generally a losing hand in CT political poker.
3. Why no mention of the heavy-handed comments by your GOP party chairman about how CT does NOT need another self-funded millionaire to run for higher office? I took that not only as a criticism of Romney and McMahon, but as a shot across the bow of Mr. Foley. Can we expect a contentious GOP nomination process and a possible primary?? Who is best suited to succeed there? Will it simply come down to money once again—who can best afford to coat the CT media with a thick, buttery layer of money, regardless of message, ability, and appeal?
4. Perhaps the best GOP candidate will be the one with the best group of advisors—meaning, not the same group of old white guys who will tell you what you want to hear mostly because it makes their monthly online bank statement look super-good. That was certainly one lesson worth taking away from Nov. 6.
5. Next week can you write about Jim DeMint leaving the Senate for The Heritage Foundation and what you make of that??
posted by: Reasonable | December 14, 2012 2:07pm
perturbed: You make good points, however—our Governor and his Democratic General Assembly—do not listen to good points—which continues to produce the same continual massive state budget deficits. nothing will change unless these—and there isn’t a chance that will happen—“as long as the big city controlling entitlement crowd vote—decide our state elections.” Realistically—the future is very dim for the struggling taxpayers in Connecticut.
posted by: Reasonable | December 15, 2012 4:06pm
LawrencCE: Instead of doing a continual criitique of Republicans who haven’t hurt us, why don’t you beat up on our Democratic state leadership that keeps burying this state to fiscal insolvency? Then you ask Heath W. Fable to write about Jim DemMint—only because he is a Republican. How has Jum DeMint hurt this country? Try to zero in Democratic leadership that is burying us—without using GOP LEADERSHP AS DECOY DUCKS—for the Democratic offenders. You can’t be honest, Lawrence, if you never tell the truth.