All eyes in the state are focused on Hartford. Can the General Assembly get concessions from state unions in order to forestall a financial collapse for a state that is edging toward $3 billion in revenue shortfalls over the next two years? We say “forestall” because the movements now taking place in Hartford are a dance of financial death for the state. The only question to be answered is it now or later.
State unions are poised to give the Malloy Administration another $270 million in givebacks from its benefits and pension packages. While those givebacks are helpful, they are an adhesive bandage for a state treasury that is in need of suturing the wounds gushing billions of dollars. While this incrementalism is necessary for the present, it does not address the structural problems that have what some call the “Richest State in the Union” owing more than $75 billion in unpaid expenditures.
At the heart of the problem are the lucrative and generous benefits that state employees, teachers and others have at the expense of the taxpayers. Given by the General Assembly during the boom years following World War II and up to the energy crisis of 1973, there was no thought that the great employment and backbone manufacturing base would ever leave the state. But it has, and now that the manufacturing base has left, we are seeing the white-collar sector begin an exodus as well.
Despite the signs that the state needed to do business in a different way as far back as the mid-1970s, when businesses started to look elsewhere for cheaper labor and costs, the General Assembly and successive governors continued to add programs and spending at rates two- and three-times the rate of inflation.
Indeed, when the state seemed to be recovering in the 1990s, instead of learning a lesson about spending and curbing the desire to create more programs, the state saw the spree continue. The income tax was supposed to give the state a better means of anticipating revenue, while a spending cap was supposed to help curb the urge to spend by legislators.
While the income tax brought in revenue, the cap never materialized as an effective means of curbing spending. In fact, it has never been implemented, with legislators using loopholes to make it a dead letter. Money that should have been shuttled into pension line-items and stashed away for bad times was used to fund another program or another expansion of spending.
In the last 20 years the increases of medical coverage costs and other benefits prompted the private sector to trim its programs and gave employees more financial responsibilities. Public sector employees were not subject to such revisions, with politicians unable to take on the public unions and the bad press that would come with any attempt to trim benefits.
So, we have this emergency measure to cut some benefits. This is the second time Malloy has had to do it in the last three years. But, it is trimming the edges.
What is needed is an entire overhaul of the state’s benefits plans and packages as well as pensions. Connecticut is bleeding dollars and it is bleeding people. The costs of living in the state have increased while jobs and wages have remained stagnant for more than a decade. High taxes and high costs prompt the young to leave. They are followed not too far behind by older state residents, who cannot afford the state.
Until the General Assembly and the governor – whoever they are and in whatever year – decide to address the structural spending problems in the budget and work to overhaul them, the state will play this game of stalling the inevitable. Eventually, we take on spending and benefits in a meaningful way or we follow the likes of Illinois or Puerto Rico and wait for the situation to get so bad collapse is imminent.