Union wages are third rail of Conn.’s politics

There was a recent hearing in Hartford reviewing the investment performance of the state’s two big public pension funds. There was much self-congratulation. Hearst newspapers published a headline: “CT’s pensions hit $55B with a strong ’23 but debate rages over how we stack up.”

First, hitting $55 billion in assets is meaningless. What matters is whether those assets are sufficient to cover future pension costs. They are not. Second, there’s no debate about “how we stack up.” Poorly. The inadequate funding of the state’s big public pension funds places Connecticut — again — in the bottom five of the 50 states.

There was no mention at all of one major factor impacting “how we stack up,” namely the rapid rise in state employee wages under Lamont. Talking candidly about state employee compensation is the third rail of Connecticut politics. No one wants to touch it, least of all Lamont and fellow Democrats who rely upon public unions for reelection.

Yet, it is the elephant in the room. Since pensions are calculated off wages, future pension costs rise in tandem with growth in wages. If Lamont’s proposed 4.5% raise for state employees next year is approved by legislators, state employees will have received a 33% compound raise during Lamont’s time in office, and that’s not counting $3,500 in “pensionable” bonuses and an average of $1,000 in pandemic pay.

It will take extraordinary investment performance just to keep up, much less improve the bottom-five standing of SERS, the state employee pension fund.

Recently, the subject of Connecticut’s finances arose when a young Connecticut father asked me at my granddaughter’s birthday party where the state’s income tax revenue goes, considering that he could see no difference in state services between Connecticut and New Hampshire, which has no income tax.

I replied that it goes into state employee compensation and followed up with an op-ed comparing Connecticut and New Hampshire. The op-ed cited the most recent study of state employee compensation in the 50 states. The comparison was stark. The spread between state employee and comparable private sector worker compensation in Connecticut was $26,894; in New Hampshire, $20,150.

Since New Hampshire has no income or statewide sales tax, its cost of living is much lower. Reflecting the cost-of-living difference, the compensation differential between state employees in the two states was stunning. In Connecticut, active state workers received an annual pension fringe benefit (normal cost) worth $14,357; in New Hampshire, $8,489. In Connecticut, they earned a retiree health benefit worth $16,637, the highest of the 50 states and more than triple New Hampshire’s $5,529.

The study is based upon broad survey data from 2017 to 2019 from the Census Bureau and from the National Income and Product Accounts.

If state legislators have the courage to touch the third rail and reject Lamont’s new 4.5% wage bump for state employees, the employees will still have received a 27% compound wage increase over the six years of Lamont’s time in office. That should be enough. Rejection might begin to bring Nutmeg State employee compensation in line with national norms, something elementally fair. It might begin to improve the funding level of SERS, something fundamentally prudent.