One of the most important components of Gov. Malloy”™s plan to solve Connecticut”™s budget crisis was a package of state employee wage and benefit concessions. When they failed in late June, the governor immediately called a special session and brought legislators back to Hartford to plug the reopened $1.6-billion gap. He asked for, and lawmakers granted him, expanded authority to cut state spending.
On their way to Hartford for the special session, legislators should have heard the latest troubling news about Connecticut”™s economy. Because our fiscal situation is among the most distressed in the nation, Moody”™s announced that it had lowered, from stable to negative, its outlook for the state”™s $14 billion in outstanding bonds. The rating agency cited our abysmal record in financing pension obligations and our very high per-capita debt as reasons for its action.
Amid the collapse of the $1.6-billion budget agreement with unions, Moody”™s pointed to Connecticut”™s “depleted reserves with slim prospects for near-term replenishment.
“In the absence of a clearly articulated plan to achieve meaningful improvement in the state”™s pension funded ratios and reduce its fixed costs, as well as progress toward adequate reserve levels” Moody”™s said in a press release, “Connecticut”™s rating could be downgraded.”
It”™s not an idle threat: Last year, Moody”™s downgraded the state”™s bond rating from Aa3 to Aa2, after lawmakers used a patchwork of borrowed money, surplus funds and payment deferrals to meet operating expenditures while draining the rainy day fund.
At nearly the same time, the Chicago-based Institute for Truth in Accounting revealed the results of its latest thorough dissection of state finances and how they are impacting individual taxpayers. The institute focused on states”™ assets and liabilities, including pension and retirement health care obligations.
According to the institute, Connecticut”™s debt burden on individual taxpayers ranked worst in the nation, with each taxpayer liable for a $41,200 share of the state”™s overall $53.35 billion in unfunded financial obligations.
“If governors and legislatures had truly balanced each state”™s budget,” said Sheila Weinberg, the Institute”™s CEO, “no taxpayer”™s financial burden would exist. A state budget is not balanced if past costs, including those for employees”™ retirement benefits, are pushed into the future.”
For years, in budget session after budget session, Connecticut lawmakers have declined to properly fund the state”™s long-term commitments to pension and retiree health care plans, letting the debt swell to alarming proportions.
Like many states, Connecticut manages retiree benefit payouts on a pay-as-you-go basis, a tactic that leaves future generations of taxpayers on the hook.
In New Jersey, where Gov. Chris Christie recently signed landmark budget-reform legislation requiring state employees to contribute more to their pension and health care plans, the taxpayer burden is $34,600, well behind Connecticut”™s tally.
On July 1, everyone in Connecticut began feeling the effects of the largest tax increase in state history ”“ more than $2 billion in taxes over the next two years. The Moody”™s report and the IFTA findings, combined with our high unemployment rate and 100,000 of our residents who have lost their jobs in the private-sector, should give legislators the strongest reasons possible to approve the governor”™s upcoming spending cuts ”“ and not resort to the familiar tactic of raising taxes to balance the budget.
We urge Connecticut”™s lawmakers to bring the cost of state government and employee benefits in line with those in the private sector and make state government more sustainable for Connecticut”™s future. Restoring fiscal responsibility will help get us out of this immediate crisis and set the state for renewed business confidence, economic growth and the job creation we need.
Joseph F. Brennan is senior vice president of public policy at at the Connecticut Business and Industry Association in Hartford. Reach him at joe.brennan@cbia.com.
