Lamont must reform public pensions

Throughout history there are moments in time, those narrow opportunities where leaders step in and capture their legacy.

When Gov. Ned Lamont delivers his next State of the State Address on Jan. 6, we will learn if he is ready to leave an everlasting mark on Connecticut’s future.

In 2018, after narrowly defeating Bob Stefanowski, the governor built his honeymoon political agenda around placing tolls on Connecticut highways. The honeymoon was short lived and ultimately what occurred was a lost session and job approval ratings that left little room for the governor to accomplish much meaningful change.

Then along came COVID-19. The global pandemic gave the governor a chance to showcase his leadership skills without having to rely on cooperation from the General Assembly. The electorate has responded favorably to Lamont’s handling of the pandemic resulting in his job approval ratings climbing out of the abyss and skyrocketing to levels enviable for any elected official.

Political reset buttons do not come around very often, but for the moment Lamont has coattails to ride on.

So what should Lamont do? What must he do in order to secure a powerful legacy and finally put Connecticut back on the path to economic prosperity? The answer is simple: The cornerstone of the governor’s 2021 agenda must be meaningful reform to Connecticut’s unsustainable public pensions.

The large state pension plans have total unfunded liabilities of $68.2 billion (as of June 30, 2019, measured with a 4 percent discount rate — the same way the Bureau of Economic Analysis and the Federal Reserve calculate the liabilities). Add onto that state unfunded liabilities of an additional $17.4 billion and it remains clear that Connecticut cannot and will not recover from the impacts of the pandemic without major pension reform. In fact, according to a new analysis from Moody’s Analytics, Connecticut has the highest debt-obligation ratio of any state, allocating 31 percent of state revenues to bond, pension and retiree health obligations.

It is a huge gift that the stock market’s volatility has delivered significant gains for the rainy-day fund, but that just puts off the day of reckoning for our state. According a long-term forecast by the Connecticut Center for Economic Analysis, we still face massive budget deficits over the next several years, perhaps reaching $4 billion. These deficits will translate into draconian cuts to municipal aid, resulting in huge property tax increases, higher education, and state programs, as well as public-sector layoffs at both the state and local level. Without intervention, Connecticut may not recover until 2030 or later.

Connecticut’s growth has been in low value-added, low-skill, low-wage jobs in tourism, hospitality, logistics and eldercare, while simultaneously we are losing nearly as many jobs in high-valueadded, high-skill, high-wage sectors. The result was an economy in February 2020 about 6 percent smaller in inflation-adjusted terms than at its previous peak.

In fact, a recent story in the Connecticut Mirror reflects that in the past year Connecticut “ranked dead last with only half the national average in wage growth, according to a new analysis from Pew Charitable Trusts.”

But it doesn’t have to remain this way. With high approval ratings and significant party control of both the state House and Senate, Lamont has a politically unique window of opportunity to right the ship.

Connecticut can commit to the datadriven, digitally driven modern economy, much like the successful efforts of our immediate neighbors and much of the national economy. We can stabilize and even reduce growth-killing property taxes, and invest in new opportunities in our communities. This can all be Lamont’s legacy if he shows the bold leadership necessary to get our fiscal house back in order. However, that cannot happen without reforming public pensions.