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OP-ED: The Terrible Consequences of Executive Failure

by | Apr 18, 2010 3:50am () Comments | Commenting has expired | Share
Posted to: Opinion

A fundamental rule when it comes to sailing is that it matters who is captaining the ship and whether the executive crew is prepared to perform their duties.

As Connecticut’s ship of state flounders in the rough seas of the worst recession since the Great Depression, the people of Connecticut, like the passengers of the Titanic, are learning that they are the real victims when leadership fails.

Ninety-Eight years ago on April 15, 1912, the “unsinkable” Titanic disappeared beneath the cold waters of the North Atlantic at 2:20 a.m. Two and a half hours earlier, with her captain tucked comfortably away off the bridge in his quarters, the great ship plowed into an iceberg. That night, the passengers learned the horrible truth about what happens when those in charge are incapable or unwilling to successfully perform their duties.

The catastrophic failures that led to the demise of the Titanic were many. The ship’s design was fatally flawed and Titanic’s staff knew little about how to deal with an accident, having conducted only one drill before the ship took on passengers.

But the moment of truth came when the ship’s leadership simply failed to perform their duties. Despite repeated warnings of icebergs and ice flows on their route, the captain and his senior leadership didn’t take the necessary steps to provide for the safety of the ship. As a U.S. Senate inquiry found, even after they were specifically warned of the danger, “No discussion took place among the officers; no conference was called to consider these warnings; no heed was given to them. The speed of the vessel was not relaxed, the lookout was not increased.”

Even after the ship’s side was ripped apart, “no general alarm was sounded, no whistle blown and no systematic warning was given to the endangered passengers.” It was nearly half an hour before Capt. Edward John Smith even ordered a distress message sent out.

Furthermore, while the ship’s lifeboats had a capacity for 1,178 (which wasn’t even enough for all the passengers and crew on board), only 706 persons were put on them as the Titanic sank, leaving 1,517 others to perish as the ship went down.

While it may seem a bit melodramatic to compare those dark events to the drama unfolding here in Connecticut, the reality is that our state is in deep trouble. As a direct result of failed leadership, the “ship of state” is plowing (or perhaps more aptly, has plowed) into the proverbial iceberg and in many ways it looks as though we are cutting loose our lifeboats and allowing them to drift away - empty. The pressing question is whether our elected officials can rise to the occasion.

The deficit mitigation package recently passed is a haphazard plan that may or may not balance the state budget but certainly does little to address the structural deficit that is poised to take Connecticut down. Since no additional revenue was created, the plan relies heavily on the use of one-time revenues, draining special funds, or making cuts that will lead to higher costs for others or reduced services for some of our state’s most vulnerable citizens.

High on the list of financial maneuvers was the shift of $23 million dollars from UConn’s Operating Reserve Account, which is primarily made up of student tuition and fees, to the State’s General Fund - a cut that will certainly lead to even higher tuition and fees for those seeking to acquire the knowledge and skills to succeed. Another $3 million was shifted from a similar fund at the Connecticut State University system as well.

Worse, next year’s budget remains dependent on an irresponsible proposal to “securitize” (or borrow) $1.3 billion by giving away $1.8 billion in state revenues over the next decade. If the proposal goes forward, the state will be undercutting the very revenue streams it will need in the years to come. If the proposal fails, next year will begin with a budget deficit of over $1 billion.

Regardless, in January 2011, Connecticut’s next governor and leadership team will inherit a budget with a revenue shortfall of significantly more than $3.5 billion. It is for that reason that the election of 2010 is so critical. The over-arching question is whether the state’s new crew will do better than the present, and whether our ship of state will be saved or allowed to sink under the waves.

Our executive branch of government plays a particularly powerful role. The governor and the executive branch are responsible for proposing a balanced budget and then managing the affairs of the state. While it is true that adopting laws and budgets requires the cooperation of both the executive and legislative branches, in the end it is the governor and his or her team that must run the $20 billion-a-year operation otherwise known as our state government.

As gubernatorial candidates travel the state, voters deserve to know more about what our next captain will actually do, and how he or she will lead.

Candidates must offer real proposals rather than empty rhetoric. Statements like, “we’ll cut a $1 billion my first day in office” are beyond absurd. The fact is that the vast majority of the budget cannot be easily modified, if it can be cut at all. Areas where cuts can be made include municipal aid, higher education funding, and a portion of human services, as well as the state’s social and cultural programs. It is hard to imagine that serious candidates can identify cuts that would amount to even $100 - $200 million dollars.

The stark reality is that even if the next governor could hack $500 million dollars from the budget, we still will be left with a shortfall of well over $3 billion dollars and no ability to borrow in order to fill that gap. Like it or not, the next administration, whether Democrat or Republican, will need to follow their budget cuts with revenue increases.

None of the choices will be easy to accept. Dramatically increasing the income tax on the wealthy, such as an increase of 2 percent on those making more than $250,000, will produce a little over $1 billion dollars. A 1 percent increase on the sales tax might produce another $500 million. Taken together, that will get the state less than half way through the deficit, and that would be after making draconian cuts. Other revenue proposals, such as highway tolls, closing corporate loopholes, or adopting a statewide tax on property with an offset for those making less than $100,000, also need to be considered.

The harsh reality is that Connecticut’s ship of state is rapidly taking on water and it will be up to the next governor and a new executive crew to develop and implement a plan of action. To that end, the most important question for candidates is not whether they support or oppose a particular budget cut or tax increase, but whether they can recruit a capable leadership team and lead when they are sworn into office in January.

The next governor will appoint more than 40 commissioners and executive directors along with more than 100 other top agency personnel. These people, in turn, select and appoint hundreds of other directors and managers, all of whom will manage, coordinate, reorganize, and redirect the state’s agencies and about 45,000 employees.

As the passengers of the Titanic learned almost to the day 98 years ago, it matters who is captaining the ship and it matters who is making the decisions on the bridge and throughout the entire management system.

In the coming months it is essential that we hear from candidates about their particular plans and proposals, as well as how they will go about putting together the crew that will take over Connecticut’s ship of state.

Jonathan Pelto served as a member of the House of Representatives from 1984-1993. He was Deputy Majority Leader and member of the Appropriations Committees during the income tax debate of 1991. He presently works as a strategic communications consultant.

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(5) Archived Comments

posted by: GoatBoyPHD | April 18, 2010  9:18am

GoatBoyPHD

Here’s a snippet from Time magazine on Ella Grasso from 1976. It speaks to her honesty and the type of value driven, no-nonsense Democrat that CT needs in yhe Governor’s office.
=========================
Like most Governors, Grasso, 56, has had a rough year. Women’s groups have assailed her anti-abortion stand. Most important, her longtime allies in labor and the Democratic legislature rejected her demands for cutbacks in social spending and an increase in the work week for state employees (from 35 to 40 hours) to narrow a big budget deficit.

Grasso has responded by ordering layoffs of up to 6,000 state workers. “I’m still classically compassionate,” she says, “but what am I supposed to do? Sell the state down the river to accommodate labor’s wishes?” Answering her own question, she says: “Women in office can be as tough as anyone else.”
===========================

Can you imagine Rell proposing 15,000 layoffs (the 2009 equivalent to Grasso’s numbers)? SEBAC has pocketed the entire Legislature and as of late pocketed Jody Rell. Rowland’s corruption is nothing compared to the virulent worm of SEBAC cronyism that corrupts the State Capitol today

posted by: FC | April 18, 2010  2:02pm

The scale of the problem is bigger than Jonathan says—probably in the $4-$6 billion range for FY 2012.  OFA makes aggressive assumptions about revenue recovery in FY2012; a more reasonable forecast raises the deficit significantly.

But two points.  First, the Democrats have been utterly unwilling to look at economic development issues.  They have walked way from one initiative that would both generate nearly 40,000 net new jobs and pay the state a revenue gain approaching $2 billion.  And there is absolutely nothing on the table to revitalize the state’s anemic economy and drive quality job growth.  At present, there is little prospect of a strong economic recovery in CT, and thus less prospect of a revenue recovery.

Second, Jonathan’s suggestions on taxes are I believe well off target.  The sales tax is seriously dysfunctional and has been deteriorating as a revenue sources.  Much better to go an across the board low sales tax with a rebate to every legal resident for the equivalent paid on a basic food and clothing budget.  It could generate $2 billion or more, with $600 million paid back in rebates.  Impose a statewide property tax of 1.5 or 2 mills with, again, a rebate to all legal residents and businesses—capturing income from the very expensive homes of non-residents (much of Greenwich, for example).  That again could generate about a net of $1 billion after the rebates. Finally, restructure the income tax, starting a lower income level (everyone should have skin in the game) and make it slightly more progressive, and add the state EITC.  Together these approaches create a far more equitable tax system, one that reduces distortions, mitigates the inequitable property tax burdens, is more stable, and generates about $3 billion net new.  That still leaves about $1-$2 billion in deficits, which still translates to about 15,000 layoffs.  But then add a real economic development strategy and we could begin to close that gap by FY 2013-2014.  (See our study, Driving Recovery at ccea.uconn.edu) 

But at the moment there is no leadership at any level in Hartford. 

FC

posted by: Anton | April 18, 2010  6:10pm

I can’t help but wonder how GoatBoy’s 15,000 layoffs would affect the livelihoods of small businesses in CT, its taxbase, and almost every other aspect of the State’s economy?

posted by: bgenerous | April 19, 2010  8:12pm

FC: Your ideas on taxes have more in common with the author than your comment indicates.  You both want a statewide property tax with credits to make it progressive.  You both want a more progressive income tax with a higher top tax rate.  Biggest difference is the approach to the sales tax and your desire to raise income tax rates at lower income levels.

posted by: OutOfOutrage | April 20, 2010  12:50pm

OutOfOutrage

I don’t like Rell but I think her leadership has to be evaluated within the context of state government overall as she is just one, very powerful, piece of the pie.

To that end I direct you to a recent quote regarding the deficit mitgation package, “House Majority Leader Denise Merrill, D-Mansfield, ... reminded her Republican colleagues that the state didn’t create the mess it finds itself in.” 

In other words, if not for that iceberg we’d be fine and who could have seen that thing coming? Indeed, who among us could have known that the economy would not expand indefinitely? Who could have known that the experts who screamed at us to turn weren’t just joking?

Rell’s problem is that she’s trying to chop down a tree using a noodle.

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