Killing the Golden Goose: Connecticut’s Non-Profit Providers and the sad legacy of undermining what works

Another key area to watch as Governor Malloy rolls out his FY 2012 proposed budget is how he handles funding for nonprofit providers.

As a growing number of people recognize, in Connecticut, the vast majority of essential human and social services are provided by a network of nonprofit, community-based providers.

Every day thousands of people turn to these nonprofit agencies to get the help they need and deserve – services that is not only making life better for those individuals and their families – but also better and safer for Connecticut.

Being nonprofit and community based, nonprofits, these agencies are able to provide high quality critical services in a very efficient and effective manner.  If these nonprofit agencies and the services they provide were not available, the cost to Connecticut and its taxpayers would be much higher as residents were forced to seek services in far more expensive venues such as emergency rooms or other state programs.

So how has state government being dealing with its non-profit providers? 

Faced with rising demand (as a result of this Great Recession), the state of Connecticut has totally and completely failed to provide any cost of living increases over the last three years –  after an even longer period of perennial underfunding. 

The reality is, despite skyrocketing costs associated with energy, insurance and medical related costs (among other factors), nonprofits have gotten no adjustment, no increase, no support despite the obvious benefits they provide and the growing need for their services. 

Although unreported, the impact of Connecticut’s failure to properly support its nonprofit, as revealed in a recent survey of providers, has been dramatic;

40% of Connecticut’s nonprofits have delayed or refused admission for new clients

63% have been forced to reduce the level of direct services to residents

65% have reduced employee benefits

68% have further increased employee contributions for health care

80% have eliminated positions

80% have delayed hiring and kept vacancies open.

Democrats and Republicans alike continue to claim that they support vital human and social services, yet their actions speak louder than words. 

The legacy of inadequate state funding means many nonprofit providers have been forced to reduce services, expand waiting lists and cut staff and hours.  Few, if any, have been able to address the growing demand as more and more individuals and families find themselves in trouble – or even crisis – due to this bad economy

So now the question is what will happen next?

Governor Malloy pledged during the campaign to protect the state’s “safety-net” and yet his recent pronouncement that he will cut $2 billion dollars from the current services budget portends that Connecticut’s non-profits are about to get shafted again,. 

This despite the fact that we have learned from the last three state budgets  that no cost of living adjustment for nonprofit providers is nothing short of a decision to reduce the level of available services for the most vulnerable citizens among us.

The Governor says he will preserve the State’s safety-net, a goal that simply can’t be achieved if the next budget has the effect of reducing essential humans services yet again?

Time to Make People Pay Their Fair Share (in addition to Balancing the Budget)

Make Taxation Fairer Now: 

Today I begin my 2nd Blog (thanks to the New Haven Advocate). http://www.newhavenadvocate.com/peltos-point.  I’m honored to be given the space to discuss some of the policy and political challenges that face Connecticut. Some posts will be cross-posted here at Wait, What… while others will be exclusive to the Advocate.  Please take a moment today to check out my site over there and sign up for updates there too.

While Gov. Dannel Malloy and the Connecticut General Assembly grapple with the record budget shortfall for next year, there is a second and perhaps, in the long run, an even more important issue – and that is using this moment to reform Connecticut’s tax structure.

True, Connecticut is facing an extraordinary fiscal crisis. It will require tough decisions about cutting programs and raising taxes. But now is the time to ensure Connecticut residents are paying their fair share and thereby reducing the overall burden on middle class families.

Understanding the overall tax burden (and who is actually burdened) is critically important.

Over the past decade or so the overall tax burden from state and local taxes has gone up slightly.

As measured by the percent of personal income that goes to pay state and local taxes, the average percent has gone from 15.6 to 15.9 percent. However, in Connecticut the average percent of income that goes to pay state and local taxes has actually declined from 14.7 percent in 1997 down to 13.9 percent in 2008.

If Connecticut residents are feeling squeezed by increasing taxes (and many are feeling that pressure) the reason IS NOT the overall growth of government, but the way the state’s tax system squeezes many middle income families while letting many wealthy taxpayers get away without paying their fair share.

The imbalance in the way Connecticut collects its income tax dates by to 1991 when the Legislature adopted a 4.5% state income tax.  With an Independent/Republican Governor and Republican votes needed to pass the legislation, the state adopted a flat rather than a progressive income tax rate.  While a change was recently made for incomes over $1 million dollars, Connecticut’s overall state and local tax system has remained the same for 20 years – a system that ends up allowing the wealthiest to pay a much smaller share of their income than middle and lower income taxpayers.

In Connecticut, the wealthiest 1 percent pays less than half what the other 99 percent of taxpayers pay on their state and local taxes.

–Connecticut’s wealthiest residents pay on average 4.9% of their income in state and local taxes.

–Middle income resident pays 10% of their income in state and local taxes.

–Lower-income residents pay 12% of their income in state and lower taxes.

When it comes to the relative burden on lower income residents, Connecticut is one of the 10 worst states in the country.

And there are a lot of those super-rich who are getting away without paying their fair share. In 2008 there were about 10,000 Connecticut taxpayers with adjusted gross incomes of $1 million or more.

For example, if the governor and legislature merely reformed Connecticut’s income tax system to mirror the source model used by New Jersey, Connecticut would have collected more than $500 million more in 2008

Bottom line: Connecticut’s income tax is more regressive than other states.

One problem is that the income tax rates on the wealthiest taxpayers mean that those people simply aren’t paying their fair share.

Another problem is that the lack of appropriate tax rate tiers means that Connecticut families who make $30,000 per year are taxed at the same rate as those making $900,000. This means middle and lower income families are disproportionately burdened.

 Conservatives and anti-government activists claim the problem is that government is too big. Reasonable people can disagree on that one, but all but the advocates for the super-rich should at least come together and make Connecticut’s tax system fairer.

It would not only help the immediate budget crisis but could provide some relief to Connecticut’s middle-income families.

To add insult to injury, last year’s deal on the state estate tax between Governor Rell and the Democratic legislators, actually made Connecticut’s tax system more regressive by further lowering the tax burden on the state’s wealthiest residents.

Connecticut Voices has a produced a number of great reports on this issue – the latest can be found at: http://www.ctkidslink.org/publications/bud11realitycheck.pdf

Malloy Administration Make More Walk the Plank (according to sources)

The news late today is that  the Malloy Administration has sent another two former Rell people packing.

The latest two are Jeff Litke and Louis Fulinello, both of whom were employees of the Department of Economic Development.  Previously Litke worked as Executive Assistant to Lisa Moody while Fulinello was a staff assistant in Rell’s Office. This brings the total of Rell staffers to be fired to at least 7.

In a post yesterday I raised questions about why the new Administration had fired Nora Duncan.  Duncan, who did work for Rell’s legislative office for two years, is much better known as a leading voice for Connecticut’s nonprofit providers of community services.

In yesterday’s post I questioned who was making these employment decisions and if Malloy or Wyman has authorized Duncan’s firing considering both have been such strong supporters of Connecticut’s nonprofits.

Things to Watch in Malloy’s Budget Proposal – Municipal Aid

Governor Dannel Malloy recently signaled that he plans to cut $2 billion dollars from Connecticut’s next state budget.

State Aid (courtesy of CT Mirror)

At the same time, he and his Administration have also pledged to do their best to refrain from dumping the state’s problems onto the cities and towns – signaling to the towns that they will not be the target of major reductions in municipal aid.

During the gubernatorial campaign Malloy even promised not to cut the Educational Cost Sharing Formula – the state’s primary mechanism for providing towns with funds to support local educational expenses.

Behind and underneath the debate about what Connecticut can “afford” to transfer to its cities and towns is the even more complex issue of how the formulas that distribute those funds are constructed.

Over the past twenty years, some of Connecticut’s most important funding formulas have been so corrupted (aka modified) by political maneuvering that they no longer reflect the underling goals for which they were created.

As discussed in earlier commentary pieces, the $1.9 billion ECS formula is a case study about how a formula can change over time to address political rather than policy goals.

With Republican Governors and increasing numbers of Democrats representing wealthier Fairfield County communities, the ECS grant has been changed significantly since it was first adopted about twenty five years ago. 

Over the past decade, Greenwich’s ECS grant has increased by 1,002 percent (from $310,000 to $3.4 million) while the grant for New London has gone up by 20.1 percent ($19 million to $23 million).

A similar pattern true across the state; 

Hartford’s ECS grant has risen by 19 percent and Windham’s is up by 25 percent

Yet Darien’s received a1,532 percent increase in the ECS grant over the past 10 years, Westport’s a1,320 percent increase, Weston’s is 858 percent higher and Wilton’s is up 3,212.

Connecticut’s poor communities still get the vast majority of state funds but wealthier towns have done a good job in ensuring that the rate of growth has favored them.

The original goal of the ECS formula was to target state aid to poorer communities so that they had the funds necessary to provide their children with a quality education (a policy that is constitutionally mandated in Connecticut). 

The amount towns received was driven by a formula that took into consideration the town’s wealth and the level of student need (as defined by the level of poverty, standardized test results and the need for English as a second language).

Widely recognized as a “national model” when it was created, Connecticut’s public officials have adopted various changed to the formula in almost every legislative session since.

The changes that were made in the late 1990s and early 2000s were “institutionalized” in 2005 when the Legislature started determining a town’s ECS grant allocation by simply adopting a set annual increase over the grant the town received in the previous year.  By applying an across the board percentage increase for each town’s grant year after year there is no longer any on-going consideration of the underlying issues that were supposed to be addressed by the formula.

Some public officials, perhaps none more than Nancy Wyman, have recognized and articulated the need to return to the fundamental issues that the ECS formula was intended to address.

Considering state government lacks sufficient state resources to maintain the present – albeit broken – educational funding system, let’s hope that the Malloy Administration uses this extraordinary opportunity to actually restructure and redirect scarce resources to where they are most needed. 

Simply capping the level of municipal aid – and maintaining the present distribution formula – disproportionately hurts the very towns that need the aid the most while protecting the towns that have the least proportional need.

When it comes to ensuring a good educational system, Connecticut’s constitution is one of the most clear and direct in the nation.  State government MUST help towns provide each child with a quality education.

As Governor Malloy tackles the state’s fiscal crisis, he has the moral and legal obligation to adopt a budget that is fair and equitable and that means going beyond simply addressing the level of municipal aid but addressing the funding formulas that distribute those funds.

Walk the Plank!

Last week, the Malloy Administration dismissed three more of the former Rell staffers who were quietly shifted out to “safer” state agency positions during the closing weeks and months of Rell’s tenure.

These most recent firings bring the total number of Rell staff that has been shown the door to five and this latest action raises even more questions about the criteria the Malloy Administration is using to decide which Rell people to keep and which dump.

Unlike the first two, who were simply not qualified for their new positions according to the Malloy Administration, this time Malloy people reported that these former Rell staff were simply the latest to go in an on-going effort to eliminate unnecessary positions.

While a number of key Rell staff remains in place, the Department of Transportation fired Philip Smith (who had served in Rell’s Office of Policy Management), David Gasior (who had served directly as an assistant in Rell’s office) and Nora Duncan who had been given the position of “legislative program manager” for the Department of Public Works after serving for two years as a  Policy and Legislative Affairs advisor in Rell’s Office.

Unlike the others who had gotten their original jobs due to their Republican campaign work and connections, Nora Duncan has a long and impressive record of advocating on behalf of essential social and human services.  Before joining the Rell administration, Nora served as Public Policy Director for the Connecticut Association of Nonprofits and Project Director for the Connecticut Nonprofit Human Services Cabinet.  In that capacity she was one of the most visible and effective voices for those who need and deserve community based services.

So the question is – why target her for dismissal.  Hardly a classic Republican, a quick check of the 2008 and 2010 Federal and State campaign contribution databases reveal that Nora Duncan did give $150 to Republican Gubernatorial and Lt. Gubernatorial candidates Fedele and Boughton but she also donated to Democrat Chris Murphy.

Dan Malloy has long articulated strong support for Connecticut’s nonprofits providers and the essential services they provide.  In fact, when he was gearing up to run for Governor he even served as the keynote speaker at the Connecticut Association of Nonprofit’s annual convention, the very group Duncan worked for.   At the time he pledged to create a cabinet level position in order to elevate support for Connecticut’s nonprofit, a promise he fulfilled when he nominated Deb Henreich to that position earlier this month.

It would certainly seem that Nora Duncan’s expertise with Connecticut’s nonprofits would be particularly valuable to the new Administration.

As discussed in earlier blog posts, it is not surprising that the new Malloy Administration is looking to divest itself of Rell political appointees but the decision to fire Nora Duncan seems out of place when compared to other Rell allies who remain in their posts.

All this raises the question, who exactly is making the decisions when it comes to these relatively high ranking political and policy jobs.

A fair question is whether Dan Malloy or Nancy Wyman approved these dismissals.  I haven’t seen the question asked yet but hopefully it will be soon.

Connecticut’s state pension fund in its worst shape since the state began saving for pension obligations in the mid-1980s.

There are times when a news article is so good, so complete that nothing more needs to be said, no analysis is needed.  This article by Keith Phaneuf is exactly that.  I’ve been writing and yelping about this subject a lot over the last few years.  This article really nails the problem. 

This is definitely a must read story.

http://ctmirror.org/story/11341/wall-street-taking-closer-look-connecticuts-ailing-pension-fund

Connecticut has about $9.4 billion in its pension fund and $21.1 billion in obligations

This translates to a “funded ratio” of 44%.  (80 percent is considered fiscally healthy).”

The ratio was 52% percent in the 2008,  but has plunged as  a result of the drop in the stock market and investments, the decision by the Governor, state unions and legislature to defer $214 million in required pension payments and the increase in the number of retirees due to the unending use of early retirement incentives to “reduce the state payroll”.

One of the most critical issues is that “Further complicating matters, state employee unions agreed in 1995  with then-Gov. John G. Rowland to shift the pension contribution system from a level-funded 30 year schedule to a back loaded system that will force dramatic increases over the next few decades.”  In essence the Rowland, the Legislature and the state and unions decided to go with a massive balloon payment system that allowed smaller payments in the short term in return for much more massive payments ‘down the road’. 

Later has now arrived. 

The required annual contribution is on pace to grow by 50 percent by 2017, double by 2026 and triple by 2038.  Needless to say it is impossible to imagine a scenario in which Connecticut could make those payments without undermining the rest of the budget.

This year, as Governor Malloy is suggesting the need for record budget cuts, the state will need to dramatically increase its state pension payments just to keep the pension disaster from getting even worse.

This article should be mandatory reading for every single person associated or interested in budget, tax and policy issues.

Senators offer Malloy more power to cut budget…

Last week Brian Lockhart of the Stamford Advocate identified a 2011 proposed bill that deserves more attention – followed by a quick defeat.  

Proposed Bill No. 187, sponsored by Senators Bob Duff (Norwalk), Joan Hartley (Waterbury) and Gayle Slossberg (Milford) is called An Act Granting Power to the Governor to Balance the Budget

It is a vehicle for giving the Governor more “budget authority” by allowing him to make even deeper cuts to the state budget without legislative approval.

Our (well-meaning) elected officials would do well to remember the important words of Thomas Jefferson when considering giving the Executive Branch powers that rightfully belong to the Legislative Branch. 

 “If the three powers maintain their mutual independence on each other our Government may last long, but not so if either can assume the authorities of the others.” – Thomas Jefferson

Concepts like the line item veto or granting the governor greater ability to refuse to follow a budget that has been passed and duly signed into law is a bad idea – regardless of who serves as Governor (or President). 

I remember strongly opposing the concept when Bill Clinton asked for and received line item veto authority in 1996.  After watching the Bush years in Washington and the Rowland/Rell years in Connecticut, I’m more convinced than ever that instead of trying to duck the issue of fiscal responsibility, we do better to simply hold legislators accountable if they fail to do their job and fulfill their duties.

I’m very glad to see Governor Malloy is quoted as saying that this legislation is not needed.  The fact is, it is simply not appropriate for the Legislative Branch of Government to grant the Executive Branch this additional authority.

Brain Lockhart’s blog can be found here: http://blog.ctnews.com/politicalcapitol/2011/01/28/senators-offer-malloy-more-power-to-cut-budget/#comment-8044

This proposal mirrors the debate in Washington….where President Obama has actually asked Congress to pass a modified and more extensive line-item veto law.

Here are some other interesting thoughts about the Legislative Branch abdicating its authority by giving the Executive Branch more power (such as through the line item veto or greater rescission authority).

“…[T]he line-item veto is a convenient distraction. The vast bulk of the deficit is not the result of self-aggrandizing line items, infuriating as they are. The deficits [have been] primarily caused by unwillingness to make hard choices on benefit programs or to levy the taxes to pay for the true costs of government.”  USA Today, March 23, 2006

 “Such tools, however, cannot establish fiscal discipline unless there is a political consensus to do so…. In the absence of that consensus, the proposed changes to the rescission process …are unlikely to greatly affect the budget’s bottom line.  –Former CBO Director Donald Marron, Testimony before Congress’s House Rules Committee

 [The line item veto] “would aggravate an imbalance in our constitutional system that has been growing for seven decades: the expansion of executive power at the expense of the legislature.” – George Will, The Washington Post 3/16/06

FYI – Two-Thirds of the cost of the Burton Family Football Complex and Shenkman Training Center came from Connecticut taxpayers.

Over the past week or so a lot of attention has been given to Robert Burton’s request that UConn return his $2.5 million donation and that they take his name off the building that honors him for that contribution.

Yesterday Chris Keating of the Hartford Courant went a long way in setting the record straight with his blog post – http://blogs.courant.com/capitol_watch/2011/01/burton-family-football-complex.html

Along with what the Courant laid out, here are the facts:

In May 2002, UConn announced that Robert G. Burton was making a contribution of $2.5 million to the University of Connecticut and his donation would “be used to build the Burton Family Football Complex on the Storrs campus.”  A naming ceremony for the Burton Family Football Complex was then held May 7 at UConn.

(Burton has already donated about $1 million to established the Robert G. Burton Endowed Scholarship Fund at UConn and the Michael G. Burton Scholarship Fund (named for his son who was captain of the Husky football team in 1999) Both are given to football student-athlete in the School of Business).

In February 2004, UConn announced that “Preliminary designs have been completed for The Burton Family Football Complex and the Indoor Facility on the Storrs campus.”  The projected cost of the project at the time was about $40 million.

In August 2005, the UConn Board of Trustees approved a “Final” project budget of $45.5 million with $31 million coming from UConn 2000, $10 million from gifts and $5 million from Athletic Department Accounts (the bulk of which is comes via the general UConn student fee).

In September 2006, the UConn Trustees approved a “Revised Final” project budget.  The total cost rose to $48.8 million of which UConn now reported $31 million from UConn 2000, $15 million from gifts and $2.5 million from Athletic Department funds.

In its April 2007 semi-annual report to the Governor and Legislature, UConn wrote that “The Intramural, Recreational & Intercollegiate Facilities Project is complete, operational and occupied. This facility houses the football program including offices, training rooms, locker rooms, dining facilities, lounge, strength and conditioning room and an indoor practice field.  When not used by athletic teams, the indoor field is used by the recreational programs.

In fact, as we learned during the UConn 2000 investigation, UConn students have very limited access to the facility.  Hartford Courant investigative reports discovered that while UConn students lined up to use exercise equipment in the old Field House, they were not allowed to use the top of the line exercise equipment in the Burton Complex that is reserved for year around use by the football team.

Most recently UConn has been moving forward on implementing a new recreation fee for students to generate enough funds to actually build a new recreational facility for students.

Oh….wait! You actually thought helping cities and towns was a priority? The incredible story of Connecticut and its casino revenue.

Or “We are from the (State) Government and we are here to help”;

In the fall of 1992, discussions between Governor Lowell Weicker and Pequot Tribal Chairman Skip Hayward led to a landmark agreement in which the Pequot Tribe would share 25% of its annual slots revenue with the state of Connecticut in return for the exclusive rights to have slots within Connecticut’s borders.

The agreement, which was expanded to include the Mohegan Tribe when it opened the Mohegan Sun, was the most generous revenue sharing agreement in the country.  For Weicker the deal was especially beneficial since it provided the state with a major new revenue stream and gave him a new and effective weapon in his on-going effort to stop other casino operators from coming to Connecticut.

Having been in and around those negotiations and discussions, I can attest to the fact that political players recognized that the “icing on the cake” was that the new funds would be distributed to Connecticut’s hard-pressed cities and towns to help support local services and provide property tax relief for Connecticut’s overburdened middle-income families.

Initially ALL OF THE MONEY was to be used for municipal aid, but even as the program was introduced the state needed to skim off about $30 million or so to help balance the FY1994 budget.  That said, Connecticut’s elected officials proclaimed that a new day had arrived, that they were (in fact) serious about property tax relief and from that day forward 85% of the slots revenue would be passed on to the municipalities via the newly created Pequot Slots Fund.

Since then, the Pequot and Mohegan tribes have more than fulfilled the state’s wildest dreams and transferred more than $5.3 billion to the state’s general fund.

However, each year, as slot revenues grew, Connecticut Governors and legislators determined that it was necessary to keep more and more of the incoming revenue at the state level rather than pass it along as promised.  The unspoken rationale was that since the state needed additional revenue to pay for existing and expanded programs it was better to utilize the slot funds rather than increase taxes – even if the net impact was that local property taxes would need to go up even more sharply.

Whereas 85% of the slot funds were passed on to the cities and towns in 1994, that percentage has tumbled year after year after year.

This year, the budget approved by the Democratic legislature and allowed to go into law by Rell allocates a paltry $61 million of the tribal slots revenue to Connecticut’s cities (An amount that equates to 16% of this year’s slot revenues).

So when politicians (of both political parties) talk about their deep commitment to municipal aid and reducing the pressure on local property tax payers, it would behoove everyone to remember that of the $5 billion that has come in via the Pequot/Mohegan Fund over the past 18 years, less than $1.5 billion actually made it to the promised destination – Connecticut’s cities and towns.

The story will remind the old timers among us of Ella Grasso’s famous promise that the Lottery revenue would go for education.

Or in other words – never forget that old adage – “Fool me once, shame on you; fool me twice, shame on me”.

But no really, providing sufficient municipal aid will be a TOP priority for Connecticut State Government.  I know because I heard them say it would be.

More on the issues underling Connecticut’s State Employee Pension System

Here is the problem:  Connecticut’s State Employee Pension fund is significantly underfunded. 

 

Back in 2000 Connecticut had put enough money aside to meet more than 63% of its state pension obligations. 

 

However, repeated decisions by Governors Rowland and Rell with help and support from the Connecticut General Assembly and SEBAC (the state employee bargaining coalition) not to make necessary pension payments or reduce the level of pension payments that were made (along with early retirement incentives that pushed more people into the pension fund) reduced Connecticut’s funded pension ratio down to 44%.

 

Today, the State’s unfunded pension obligation is over $11.7 billion. (Or roughly a debt equal to $3,333 for every Connecticut resident).  Connecticut owes that money.  It will have to pay that money and it has not put aside the funds necessary to make those payments.

 

Connecticut’s system is one of them of the most underfunded systems in the nation. 

 

Despite this situation, much of what we hear about Connecticut’s state employee retirement system is so laced with partisan rhetoric and false statements that makes it almost impossible to have a meaningful debate about the problem and it’s vital that the state engage in an honest discussion about the pension system and its problems based on the facts and not the hype…

The real facts are these.

Connecticut has 57,825 state employees enrolled in the state’s employee retirement system.  Within that system are four separate pension program.  The old Tier 1 state employee pension program, which was closed to new enrollees in 1984.  Next the state adopted the Tier 2 program that began in 1985 and was then replaced by the revised Tier 2A program.  Finally, the Alternative Retirement Program provides a retirement system for faculty and selected staff at Connecticut’s public colleges and universities.  Instead of a pension these state employees receive what is in essence a 401(k) contribution that they can then take with them as their careers take them to other universities around the country.  Members of the Alternative Retirement Program do not receive a Connecticut state pension.

Of Connecticut’s active employees, the distribution of retirement plans is as follows;

 

Tier 1       4,569

Tier 2     19,298

Tier 2A   26,345

ARP         9,613 

 

Meanwhile there are 48,127 state retirees that receive some sort of pension and/or health benefits that they earned by fulfilling their legal requirements when they served as active state employees.  The following breakdown lists retirees by the retirement program the participate in;

 

Tier 1      29,888

Tier 2     10,986

Tier 2A       862 

ARP            391

 

As I reported in an earlier blog post, it is fair to say that the old Tier 1 pension program was pretty generous.  It is also vital to understand that of the 34,457 people participating in the Tier 1 system, 87% of them have already retired.  Only 13% or 4,569 active state employees remain in the Tier 1 system.

The average annual pension for Tier 1 employees is $34,917. 

However, since the benefit is calculated on the total number of years worked multiplied by the employees’ highest three years of income, some employees have managed to acquire large pensions either because they actually had high salaries or they used over-time to push up their salaries prior to retiring.  There are a total of 1,780 retirees with state pensions of $75,000 or more and 365 enjoy pensions of over $100,000.

Of the total 30, 284 people who are in the Tier 2 retirement program, 64% have retired and 36% remain in active service.   The average annual pension for Tier 2 retirees is $21,335.  The way Tier 2 pension is calculated it is more difficult for artificially pushes up one’s pension.  As result, there are 76 Tier 2 retirees with pensions of $75,000 or more and 15 with pensions of over $100,000.

The Tier 2A, the present retirement program for new state employees includes an even more limited pension program.  As of now, only 3% of the 27,207 Tier 2A employees have retired and the annual pension for these 862 individuals is only $11,289.  Of the Tier 2A retires one has a pension of over $75,000 and none have a pension of 100,000.

The bottom line is that new state employees and the vast majority of present state employees will not be receiving so-called “excessive” pensions when they retire. 

And while the state may want to explore creating yet another – Tier 3 – pension category, the real issue facing Connecticut IS NOT “reforming” the level of pension benefits for incoming state employees but how to deal with the obligation the state created under its older and now closed pension categories.

On a related front, there are some who want to explore the possibility of Connecticut reneging on its legal obligations by retroactively changing pension benefits or somehow defaulting on future payments. 

However, it is highly unlikely that the federal courts would allow a state to do that. Legal rulings to date are pretty clear.  While a private company can use bankruptcy to modify or avoid debts, states, with their taxing powers, do not have the ability to do that. (Although some states like California are or may seek ways to put that question to the test). 

Putting aside the moral question, the reality is that Connecticut will not be able to modify pension levels for those who have already retired and so we return to the fundamental problem of the fact that Connecticut obligated itself to future pension payments and then failed to set aside the funds to meet those obligations.

Furthermore, even if the state and unions could agree on legally allowable changes for present employees (and that is something the new Governor and the bargaining process can definitely explore) the bulk of the future obligations for retirees and future retirees are already in place. 

The failure of Connecticut state government to put aside the necessary funds simply can’t be undone.  The pennywise and pound foolish decisions of our elected officials have come to haunt us and separate of any discussions on “reforming the system”, the State must act by dramatically ramping up the level of funds it sets aside for obligations that are and will continue to come due.

When it comes to blame, there is certainly enough blame to go around but the burden now rests on Governor Malloy and the Connecticut General Assembly to respond to those mistakes and set things right.