The Middletown Press (Middletown, CT)
Unfunded pensions, unions sinking Conn.
Connecticut should be thriving with a great location between New York City and Boston, good schools and a highly educated workforce. For decades, those attractions coupled with regionally low taxes fueled rapid economic growth and the highest income per capita in the nation.
Not anymore. This week CNBC’s annual assessment of the top U.S. states for business in 2019 ranks Connecticut among the bottom 10 states for overall economy, transportation infrastructure and the cost of doing business. A Bloomberg analysis measuring the movement of income between the 50 states provides an even bleaker assessment of Connecticut’s loss of competitiveness: Connecticut ranked 50th. At the current pace losing 1.6 percent of net income per year, Connecticut will hemorrhage a staggering 30 percentplus over the next 20 years.
Connecticut’s former attractions are today’s repellents. Trains that connect the state’s economic engine of Fairfield County to New York City are slower today than they were in 1970 from failure to perform basic maintenance. The education system produces insufficient workers with high demand skills such as computer science and engineering following years of stagnant funding for UConn. Connecticut’s tax burden is the nation’s second highest after multiple increases in income, sales and property taxes.
This toxic combination drove out Connecticut’s then largest business, General Electric, soon to be followed by its now largest business, United Technologies.
The underlying cause of Connecticut’s deterioration is massive unfunded retirement benefits for government employees. Connecticut’s elected officials have worked handing love with labor union bosses to promise benefits far richer than in the private sector. Worse, they failed to require either government or workers to put aside enough money to fund them.
The bills are coming due. The average U.S. state spends about 10 percent of its budget on debt service and unfunded benefits. Connecticut currently spends more than 20 percent — more than twice as much. According to JP Morgan, Connecticut would need to spend a staggering 35 percent to cover the true cost.
Famed investor Warren Buffet has warned businesses located in states with large unfunded retirement benefits about future tax increases. Three of the four states with the highest unfunded liabilities — Connecticut, Illinois and New Jersey — validate Buffet’s concerns. Connecticut just adopted hundreds of millions of dollars of sales tax increases. New Jersey recently raised income taxes. Illinois is trying to pass a state constitutional amendment to allow it to raise income taxes.
Connecticut’s tilted political process caused the problem and blocks a solution. State government is dominated by government employee unions that have kept one party in control of the legislature for almost 40 years. Union power has become so pervasive that the Speaker of the House is an employee of government union AFSCME that pays him a sixfigure salary.
The uniondominated legislature has made Connecticut one of only four states in the country that grant government unions the power to collectively bargain for their retirement benefits. It has granted government unions unique authority in Connecticut to automatically deduct dues from worker paychecks.
In a selfperpetuating cycle, government unions use automatically collected dues to support candidates that will take care of them. Government unions negotiate their benefits with a governor they have helped elect that are approved by a legislature led by its own employee.
Connecticut’s recently elected Democrat Governor Ned Lamont and the Democratdominated state legislature are following a familiar script. They have proposed and adopted a budget that postpones $9 billion of budgetbusting payments for the teachers pensions at the cost of increasing the bill to a staggering $27 billion.
The irony for government employees and retirees is that the largesse their union bosses have won for them will ultimately be its undoing. For every three state troopers there is only enough money put aside for one. If income continues to exit the state at the current pace, the money will eventually run out and a judge will decide who gets what.
The intergenerational promise of the American Dream is that if you work hard and play by the rules you will do better than your parents and you do all you can to make it so for your children. Government unions’ stranglehold in Connecticut is choking the life out of this promise for more and more of its residents.
A century ago, many states were dominated by the corrupting influence of monopolistic businesses. The railroad, steel, sugar and other socalled trusts literally bought state legislatures to benefit themselves at the expense of the public good.
President Theodore Roosevelt exposed corruption and fought entrenched interests — including in his own party — to level the playing field and restore balance to American democracy.
TR began his public service as New York City’s police commissioner. On cold evenings he wore a cape as he pursued and caught criminals — inspiration for fictional caped superheroes such as Superman. We will need similarly heroic leadership in Connecticut and states with similar challenges to revitalize the promise of the American Dream.