First Aetna, now United Technologies takes time to instruct Connecticut State Government on how to succeed.

Cross-posted from Pelto’s Point (New Haven Advocate)

One of the most telling commentary pieces I’ve read in a long time was published this past weekend in the Hartford Courant.  Greg Hayes, senior vice president and chief financial officer for Hartford-based United Technologies Corporation wrote “Tough Choices On Taxes, Spending Will Help Business”

The strength of the commentary piece lies in the belief that Connecticut can and should align its “business practices” with that of one of the most successful corporations in the world. 

Hayes instructs the people of Connecticut and its elected officials that, “Streamlining state government will pay big dividends for Connecticut’s citizens and taxpayers by lowering costs while improving services. Although not an easy task, we can do more with less. Don’t let anyone tell you that this is not possible. It happens whenever you reduce waste and improve efficiency, something the employees of United Technologies do every day.”

He further warns that, “Tax increases should be modest and last only as long as absolutely necessary to resolve the budget crisis. Strict ‘sunset’ provisions must be enforced to ensure today’s temporary taxes do not turn into permanent tax hikes.”

Considering that Connecticut would need $3.2 billion in new revenue to maintain its current level of services, it’s instructive that UTC’s message is to only look to increased revenue as a last resort and then only adopt minor and short-term tax increases. 

This “new revenue as only a last resort” is a profound observation coming from a company that receives two-thirds of its revenues from outside the U.S.  A company that is the “dominant player in the Chinese elevator market with an impressive three-quarters share of the market.”  Today China has about one in every three elevators in the world and their ever-increasing need for more elevators means UTC’s revenues will continue to grow.

In addition, much of UTC’s remaining (and U.S. based) revenue comes from the sale of aircraft, aircraft parts and aircraft maintenance.  As a result, UTC’s revenues have been growing significantly since 2001 thanks to major orders from the U.S. government.  As one Wall Street expert noted “Specifically, the company has benefited from the ongoing war in Iraq.”

To equate the concept of taxes with that of corporate revenue is a telling observation.

By far the most interesting part of the commentary piece is the executive’s directives on what the state should be doing on the expenditure side of the budget. 

First, he tells Connecticut to deal with its pension crisis, noting that UTC has done just that. 

Hayes informs the reader that UTC has not only made structural changes to their pension plans for new and future retirees but “added more than $1.5 billion to its global pension funds last year alone to ensure we can honor commitments to our employees for their retirement.” 

We know that Gov. Rell and the Democratic legislators choose exactly the opposite strategy forgoing almost $300 million in required payments to the pension fund over the last two years.

Hayes goes on to instruct state leaders to maintain their research and development tax credit that gives significant tax breaks to companies that conduct research to develop more products (which UTC and its subsidiaries have regularly benefited from). Hayes says these types of tax breaks encourage “businesses to invest in high-value knowledge work that is best suited to Connecticut’s relatively high cost of living.”

Finally, UTC reminds the state to make education a priority.  He points out that education “is critical to maintaining a globally competitive workforce” and reflects on his company’s extensive commitment to training its employees.  Hayes challenges Connecticut suggesting that “the state’s commitment to quality educational performance should be equally strong”.

Finally Hays concludes that “No household, government or business can thrive by continuously spending more than it takes in. Nor can any organization succeed without sowing the seeds of growth. That’s why measured cuts in state government, improved efficiencies, modest and limited tax increases and protection of key incentives are the steps we should take to promote lasting job growth and prosperity. Gov. Malloy’s tone and leadership on resolving the state’s budget crisis have us on the right track.”

Considering that just a few weeks ago, Aetna’s CEO informed us that Connecticut’s budget decisions would determine whether Aetna moved jobs out of state, I suppose it’s heartening to hear that UTC thinks the Governor’s “tone and leadership” have put Connecticut on the right path.

But, of course, the threats and complements from Connecticut’s corporate elite leaves out the broader question of whether, in fact, running a company focused on profit is or is not different than operating a government that is responsible for fulfilling our collective obligation to provide for a just and civil society. 

While UTC is certainly a shining example of how a corporation can succeed by maximizing the opportunities of the global marketplace and benefiting from the “military-industrial complex”, one would expect that someone as educated and successful as a senior executive at UTC would, at the very least, make some mention that a multi-national corporation has greater “flexibility” to make ends meet since it is not “burdened” by having to provide a wide range of vital and important services, none of which “make money.” 

Certainly if prisons and public safety, nursing homes and group homes, schools and infrastructure or providing services for those with developmental disabilities, mental illness or other social, health or human needs could be profit making ventures, the role of government would be very different.

In a democratic society each person has an opportunity to stand up and be heard and UTC’s executive viewpoint is an interesting addition to the discussion.  However, speaking out should come with some obligation to put observations in context and be truthful about the challenges that face our society and our government.

Last quarter, UTC’s earnings per share rose 14%, with the company’s large engine business up by 45%.   Thanks to this revenue growth, UTC exceed Wall Street’s consensus estimate for the sixth consecutive quarter.  

This is not to say Mr. Hayes’ observations are not worthy of consideration but it would have been a bit more honest if he has revealed that as corporate Connecticut raises concerns about the number, pay and benefits going to Connecticut’s state employees, the author of the commentary piece recently received a compensation package of $5,956, 757 including salary, bonuses, restricted stock awards, non-equity incentive plan compensation, deferred compensation and other benefits.

Connecticut Republicans: When Rhetoric becomes more Real than Reality

Cross-posted from Pelto’s Point (New Haven Advocate)

Over the weekend, State Representative Lawrence Cafero, the Republican Leader of the House wrote a commentary piece in the Hartford Courant in which he claimed “Malloy’s Budget Undercuts His Tough Talk”.

The Republican leader offered Governor Malloy a backhanded compliment on his “no gimmick” budget and his plan to get huge givebacks from state employees and then blasted the Governor as a big spender and proponent of more government.

Cafero’s piece is a sad testament to why Legislative Republicans are such a useless force in Connecticut politics.

As an alternative, Cafero offers up a plan Connecticut’s Senate and House Republicans put forward back on January 2011 called “Common Sense: Commitment to Connecticut”, borrowing heavily from Newt Gingrich and his “Contract with America”.

According to the Connecticut Republicans theirs is a “comprehensive set of proposals and ideas to bridge the fiscal abyss the state faces, including billions in savings from all public employees, union and non-union. They also proposed merging 43 agencies into 11 to save millions more, privatizing inefficient state services, rolling back spending to previous levels and selling off assets such as airports and other operations that costs taxpayers more money every year than they bring in.”

Their plan can be found at http://www.cthouserules.com/wp-content/commonsensefinal.pdf.

The Republicans claim that by “rolling back spending to previous levels to save as much as $1.6 billion; a 5 percent reduction in the state’s workforce for $250 million in cuts; and state employee givebacks worth nearly $1.75 billion” will allow Connecticut to eliminate its $3.5 billion budget deficit.

In fact, the Republican say that their “no tax increases needed” budget would actually provide a surplus at the end of next year.

But here is the problem.

The numbers don’t add up. They don’t even come close. Their plan is an utter and complete fraud worthy of a Bernie Madoff scheme. Either they are purposely trying to mislead the public or they are so incredibly ignorant of the facts that they don’t even know the difference between an annual budget and a bi-annual budget.

FACTS about Connecticut’s Annual State Budget:

Debt Service: $1.9 billion (9.7% of the budget)

Grants to towns: $2.8 billion (14.2%)

Personal Services $3.3 billion (17%)

Fringe Benefits $3 billion (15%)

Medicaid/SAGA $4.7 billion (24%)

All Other Expenses $4 billion (20%)

Fact #1: Malloy is seeking $2 billion dollars in employee givebacks to balance his budget over two years. That is a reduction $1 billion for the coming fiscal year. The Republicans want to increase that amount to $1.75 billion – THIS YEAR. Malloy’s number cannot be achieved. His is 5 times greater than what Governor Rell saved in the last round of negotiations and that included a wage freeze, furlough days and NO pension payments.

The Republicans are suggesting savings of almost twice what Malloy can’t get. Not only can’t the Republican’s number be achieved, to suggest it can is an absolute fraud.

Fact #2: Malloy is proposing $400 million in cuts to programs and services.

The Republicans want to quadruple that amount to $1.6 billion. Review the chart above. Debt service cannot be cut. The Republicans, like Malloy, commit to preserving municipal aid. The Republicans, like Malloy, are seeking record concessions from the Personal Services and Fringe Benefits which removes those two items from the list of potential cuts. So that means the Republicans are proposing to cut $1.6 billion from the remainder of the budget – or $1.6 billion from the remaining $8.7 billion that pays for all hospitals, nursing homes, group homes, social services and all other expenses. Cutting that amount would destroy much of Connecticut’s most essential services and we can be sure that not a single Republican legislator would ever support such massive and destructive cuts.

Fact #3: The Republicans call for cutting 5% of the state workforce to save $250 million. As the numbers above reveal, to save $250 million from the Personal Service line would be a cut of more than 10% of state personnel.

So what is the bottom line?

The Republican’s are blasting Malloy for not cutting enough and then put forward a plan that is so absurd that not a single one of them would actually vote for such a document.

But, while their plan is absurd and impossible to achieve it makes good rhetoric and as long as they aren’t called out on it… their Rhetoric becomes more Real than Reality.

Heck, Let’s Just Save Money And Get Rid of the Legislature

Cross-posted from Pelto’s Point (New Haven Advocate)

Another Wait, What? Moment as Malloy makes budget power grab 

About a month ago I blogged Proposed Bill #87 An Act Granting Power to the Governor to Balance the Budget  that sought to grant the Governor unprecedented powers by allowing him to make deep cuts to the state budget without legislative approval.

Noting the words of Thomas Jefferson who said “If the three powers maintain their mutual independence of each other our Government may last long, but not so if either can assume the authorities of the others.”, I wrote that 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 was a bad idea – regardless of who served as Governor (or President). 

At the time, Governor Malloy’s spokesperson said the Governor “appreciated the offer but it was not needed.”

That was good news since it’s simply not appropriate for the Legislative Branch of Government to grant the Executive Branch this additional authority.  In fact, it is the very concept of “checks and balances” that is perhaps the single most important part of our Federal and State Constitutional system.

My post can be found here: Senators offer Malloy more power to cut budget…

Now, fast forward to today for an article in the CTMirror “Malloy seeks authority…”  that reports that Malloy’s proposed budget not only includes a provision to allow him to cut up to 10 percent of the budget without legislative approval but includes, for the first time, authority to cut municipal aid by that amount as well.

Connecticut’s current state law already gives the Governor the ability to reduce most accounts by up to five percent without legislative approval and the present statute excludes certain areas of the budget for which the Governor would have to get legislative approval such as debt payments, state employee salaries and benefits and municipal aid.

In Connecticut, the Governor has ample authority since he or she proposes the budget and has the ability to veto any budget deemed inappropriate.  Having limited authority to make emergency cuts in that approved budget is one thing, but in a representative democracy, no executive authority, Democrat or Republican, should be able to unilaterally cut 10 percent from a budget without a check and balance by the Legislative Branch of Government.

One question that comes to mind is why Governor Malloy rejected this inappropriate idea just a couple of weeks before he included it in his proposed budget?  Also, if he really feels this exceptional authority is really needed to get Connecticut out of this crisis why not ask for this authority only for duration of this budget cycle – two years – and not undermine Connecticut’s Constitutional process?

Essential Services in the Land of Plenty

Cross-posted from Pelto’s Point (New Haven Advocate)

Depending on what data you use the United States ranks 5th in the world in per capita income and Connecticut ranks #1 or #2 among the 50 states. 

It is certainly fair to say, at least as far as the rest of the world and the rest of the country are concerned, Connecticut is both envied and considered the land of plenty.

But of course, despite all the wealth, we know that many of our fellow residents need help just to survive and many more need some type of assistance to achieve an acceptable 21st Century standard of living.

While people can disagree about what role government should play in ensuring that its citizens have access to the resources necessary to live fulfilling lives, many would, at the very least, define essential government service as those that provide Connecticut’s people with access to food, shelter, healthcare and the social and educational programs that they need and deserve to create healthier, safer and better lives for themselves and their families.

Yesterday we learned that the number of Connecticut residents receiving food assistance grew by 30 percent  from the 2009 to 2010 and that now more than 336,000 people use food stamps to put food on the table.  We also learned that the Department of Social services is so dysfunctional and lacking in leadership that Connecticut “wrongly denies food stamps to eligible residents at a higher rate than any other state”.

Another essential service provided by the state of Connecticut is its HUSKY healthcare program. 

HUSKY is the foundation of Connecticut’s system of health care for children whose families cannot afford healthcare.

The historic SustiNet initiative (which was up for a public hearing last week) is designed to expand access to healthcare and replace the existing HUSKY program.  However, that initiative was dealt a major setback when Governor Malloy’s Administration recently came out against the implementation of SustiNet despite the fact that Candidate Malloy said, or at least implied, that he would support the program when he became Governor.

As it now stands, almost one in every three children in Connecticut is enrolled in the HUSKY program. HUSKY health insurance covers more than 406,000 children, parents, and pregnant women.

With fewer Connecticut families able to afford their own healthcare insurance and employer healthcare plans being dropped or priced out of range, enrollment in HUSKY has jumped 6.6 percent.

The vast majority of the money to pay for HUSKY insurance comes through the State’s Medicaid program which is good news for Connecticut taxpayers since the Federal Government reimburses Connecticut for 60% to 65% of the total costs.  That means for every $3 Connecticut spends on its HUSKY program, the Federal Government gives the state nearly $2

Since the HUSKY program is aimed at Children and their parents, Connecticut still has over 400,000 residents who don’t have any healthcare insurance (which is one of the reasons the SustiNet program is so important.

Governor Malloy’s proposed budget seeks to preserve most of the HUSKY program but he does call for changes that would impact many of the poorest and most vulnerable people in our state.

The Governor’s budget saves state dollars by requiring HUSKY families to share more of the cost of the insurance while reducing some health benefits or other services used by children and families in the HUSKY Program.

Malloy’s budget;

Cuts $8.2 million by imposing new co-payments on some children and most adults in the program

Cuts $9.8 million by reducing dental services for parents and other adults in Medicaid

Cuts $825,000 by requiring that adults in Medicaid only get one pair of glasses every other year

Saves $6 million by delaying for two years the start of a program to provide foreign language interpretation services for patients

Cuts $1 million from the HUSKY B program (although the budget doesn’t explain how that is to be achieved)

Finding places to cut the state budget is certainly a paramount concern.  Many would probably consider reducing coverage for eye-glass an appropriate step, but some of the other proposed cuts are, at best, short-sighted.  Numerous studies have shown that instituting these types of co-payments actually results in people utilizing these services less, thus not getting the medications they need, which in turn leads to more emergency rooms visits, which end up costing taxpayers far more.

For more on the impact of Governor Malloy’s budget on children check out the great reports that CT Voices for children have done at http://www.ctkidslink.org/pub_detail_532.html

No more gimmicks – well okay, one more, but then no more after that!

Cross-posted from Pelto’s Point (New Haven Advocate)

The gubernatorial campaign of 2010 was marked by a universal condemnation of the budget gimmicks and irresponsible fiscal maneuvering that got Connecticut into its present fiscal disaster.

Candidate Malloy was probably the most outspoken critic of the fiscal shenanigans that had become the norm in Connecticut state government and earned praise across the board for his commitment to put an end to governance by gimmick.

So although many were shocked by the magnitude of Governor Malloy’s proposed tax increases and budget cuts, newspaper editorial writers have showered the Governor with accolades for having the courage and conviction to put an end to fiscal gimmicks and finally provide the state with a balanced budget.

And the new Governor’s commitment to balancing the budget is, indeed, impressive but there is one huge problem with the picture.

Although Malloy’s budget contains hundreds of millions in new income taxes and hundreds of millions in program cuts, the single biggest change in the entire state budget is his decision to include $1 billion dollars in concessions by Connecticut’s state employees. 

The number the Malloy Administration has used to “balance” the budget is not achievable and everyone “in the know” knows that. 

Without this faulty number, the Governor’s proposed budget is more than a half a billion out of balance.  To address that massive hole up front would have required even more taxes and program cuts.  From the anger and frustration that is presently sweeping Connecticut as a result of the size of the taxes increases and program cuts he did propose, one can certainly understand why the Governor and his people would do everything possible to postpone the understanding that even more taxes and cuts will be needed.

So instead of providing a true balanced budget, Governor Malloy made it very clear.  If the state employees fail to provide $1,000,000,000 this year – and another $1 billion next year – he would be forced to shred the state’s human and social service safety net and lay off thousands of people.

So a billion dollars from the state employees or else all Hell breaks loose.  Let’s examine the facts:

The economy is bad, most people aren’t getting increases or bonuses (unless you work on Wall Street) so let’s start by cutting out the money that would be needed to give state employees a raise of 3% or so.  Easy to defend, easy to do and saves the State $160 million dollars. 

Next, furlough days are another good way to save money.  Many states and even some private employers are using them.  Employees are told to stay home a certain number of days and that way the employer doesn’t have to pay them for that day. For each furlough day, Connecticut saves $14 million dollars.  Each of the past two years state employees have been given 3 ½ furlough days for a savings of about $48 million a year.  Let’s double or triple or even quadruple the number of furlough days.  We’ll tell state employees to stay home 1 day each month.  True some critical work may not get done, but budget cuts are needed and the net effect of 12 furlough days is cutting pay by 5%.  The good news is we save another $168 million. 

 So we’ve frozen pay and effectively cut wages by 5% with furlough days and we have saved a grand total of $328 million.  We only have $672 million to go to meet the $1 billion dollar mark.

We can increase the amount of money that state employees must contribute to their pensions.  Over the long run that will help put the State Employee Retirement System (SERS) on better footing but unfortunately it will have not save the taxpayers any money now.  Why? Because when Governor Rell and the Democrats decided not to make the required payments to the Pension Fund over the last three years, the fund became so underfunded that we now have to make those payments just to ensure the Fund stays afloat.  That said, if we require state employees to contribute 3% more of their salary, it will get an extra $96 million into the Fund.  A worthy step perhaps but doesn’t count toward the $1 billion Malloy has demanded.

Connecticut state pensions, like Social Security and most other public pension funds have a Cost of Living Adjustment that is tied to inflation.  That said, Connecticut could cap or even eliminate COLAs for future Tier II and Tier IIA retirees.  Again, it wouldn’t save any tax money now but would save the Pension Fund almost $50 million a year going forward.

There has also been talk of basing a retiree’s pension on their average salary over a five-year period rather than the present 3 year system.  This change would make “gaming” the system more difficult.  Again, it wouldn’t save taxpayers now but would mean a savings to the Pension Fund of about $22 million a year going forward.

Finally, increasing medical premiums for active state employees is definitely an option.  Increasing employee premiums by $350 might save as much as $18 million.  If we really want to dump on state employees, lets demand something really outlandish and see if we can jack up their premiums by $1,000.  That will teach them and at that level we might even save $60 million a year.

So where does that leave us.  No pay increase, a dozen furlough days and blowing their co-pays through the roof and we save taxpayers a total of about $388 million next year. 

It’s an impressive amount.  The problem is, if the Malloy Administration is successful in actually bringing state employees to their knees and wins all of those concessions, the budget will still have a $612 million deficit.

And that, in turn, brings us back to Malloy’s pronouncement that if the state employees fail to provide $1 billion in savings, the budget will be out of balance and the fault will lie squarely with the state employees and no one else.

Saying the budget is balanced when it is not is, in short, a gimmick to beat all gimmicks. 

Malloy gets the credit for proposing a balanced budget despite knowing that it isn’t balanced and when Connecticut discovers the budget isn’t balanced after all, the fault is not the Governor’s but those good–for-nothing state employees.

The very state employees, who, as we all know, are already public enemy #1. 

It is a brilliant strategy. 

The Malloy Administration and the state employee unions engage in hard negotiations.  The state employees know that if they don’t give enough they will be laid off.  Then, when they do give, the Administration is “forced” to regrettably announce that the budget is fatally in deficit and the Governor has no choice but to make additional cuts and propose additional tax increases (but at no fault of his own).

 So the era of budget gimmicks is over – just as soon as we get through this last one.

A CT State Budget Note: Revenue and Expenditures

What sources does Connecticut use to raise funds  (This year’s budget – Fiscal Year 2011)

 Source of General Fund Revenues:

 Income Tax                                       36%

Federal Funds                                   22%

Sales Tax                                             17.5%

Business Taxes                                 6.7%

Transfers from other Funds       6.3%

Gambling Revenue                         3.5%

Tobacco and Alcohol                    2.9%

Other Revenue and Taxes           5.2%

 *Other Revenue and Taxes include Inheritance Tax, Real Estate Conveyance Tax, Admissions, Licenses, permits,  Fines and of miscellaneous.

 What are the Major Growth Factors that explain the increase in expenditures (2004 – 2010)

Annual growth rate for selected key programs and categories:

Debt Service (interest/principal on bonds        5.3% average growth per year

Medicaid (Health Care)                                              5.2%

State Employee Wages and Benefits                     4.5%

Education (ECS Grant)                                               3.4%

Residential Services (group homes etc.)           6.7%

General Assistance (poverty program)             6.1%

State Funding for Higher Education                    3.4%

Think of “Shared Sacrifice” more as a term of art…

Cross-posted from Pelto’s Point (New Haven Advocate)

As more detailed analysis of Governor Malloy’s income tax proposal takes place, the public is learning that some may consider his pledge of “shared sacrifice” as a bit more rhetoric than reality. 

If adopted as is, the public will learn that the plan isn’t quite as “fair” a distribution of burden as middle-income families might have hoped.

The Malloy Plan shifts the state income tax from 3 to 8 progressive tax brackets, eliminates the property tax credit and changes (phases out) the amount of income that is taxed at the lowest 3 percent rate.

The net impact is that those making between about $50,000 and $120,000 will be surprised to learn that their income taxes will be going up by a much higher percent than those who make $120,000 to $250,000.

It’s complex to be sure, but when all the various calculations are made the impact for a the average Connecticut couple is as follows;

Amount           Percent Increase in Taxes

$60,000           38% increase in their income tax

$80,000           18% increase

$100,000         12.5%

$120,000         10.9%

$150,000         10.2%

$175,000         9.6%

$200,000         9.4%

$250,000         10.5%

$500,000         13.8%

$1,000,000      20.0%

2,000,000        10.4%

Keith Phaneuf at the CTMirror has a lengthy story on the complicated changes the Malloy has proposed.  The Legislature’s Office of Fiscal Analysis has also done some preliminary work on the impact Malloy’s plan will have on Connecticut households.

Take a look at Phaneuf’s article to learn more: http://www.ctmirror.org/story/11598/malloy-hopes-cut-through-confusing-tax-math.  His story also includes some great charts that provide addition examples of the impact Malloy’s Plan would have.

Just Look at them – The Damn State Employees and their Damn Pensions

(cross-posted from Pelto’s Point – New Haven Advocate)

Listening to the Governor and some elected officials, one of Connecticut’s most significant problems are the excessive pensions state employees receive.   Governor Malloy has called for a billion dollars in state employee concessions and one of the items he has highlighted is the need to reform Connecticut’s state employee pension program.  Other politicians and newspaper editorials have hailed his tough talk.

So let’s explore some of these issues – starting with state employee pensions.

Today’s question is – What is the Average Annual State Employee Pension?
(a)  $26,900
(b)  $31,900
(c)  $36,900
(d)  $41,900
(e)  $46,900
(f)  $51,900

The correct answer is (b).  Of the nearly 40,000 retired state employees who collect pensions, the average pension amount is $31,900 per year.

Let’s be clear, that is not to say that there aren’t individual state employees who were able to “game” the system prior to retiring and now receive larger than average pensions, but the truth is the average retired state employee receives a state pension of about $32,000 a year.

Average Connecticut State Pensions by Department or Agency

State Police $48,500
DOC – Central Office $39,732
Environmental Protection $38,700
Transportation $38,300
Criminal Justice $38,000
Corrections $36,400
Labor Department $36,300
Mental Health $35,700
Revenue Services $32,100
Social Services $30,500
Judicial $29,700
Vo-Tech High Schools $29,200
Mental Retardation $27,600
Motor Vehicle $25,400
Public Safety – Civilian $25,200
    
The real problem is not the number of retirees or the average pension employees receive but the fact that elected officials failed to set aside the funds necessary to pay state pensions and now the bill is coming due.

Imagine that instead of paying your full mortgage you only paid the bank 40% of what you owed each month and then at the end of 5 years you received a bill from the bank that you need to pay all the back money you owed.

Sure you would be upset about getting the bill, who wouldn’t?  But would you be angry at the bank?  Would you be angry at the house?  Would you be angry at the real estate agent who sold you the house?

Or would you admit that you really should have paid the amount due each month so that this day wouldn’t come.  
 
Listening to some of Connecticut’s elected officials – it is the state employees who are at fault for doing the work and getting the pensions or it is the fault of the employee unions for negotiating the contracts.

Of course, when one examines what occurred, the fault lies squarely with the elected officials who failed to make the required payments and now stand around shocked and dismayed that the bill has arrived.

Over the last three years, Governor Rell and the Legislature failed to make nearly $300 million in required payments to the pension fund and that was after two decades of underfunding the state pension fund (along with the huge losses in the value of the fund due to the stock market decline of the last few years).
 
The Governor and Legislators can call for pension reform all they want, they can seek to punish the state employees who have followed the rules and earned their pensions or they can stand up and take responsibility for their actions, pay the bills that need to be paid and discuss whether changes, if any, are appropriate moving forward.

As we learn more about the proposed state budget (2-18-11 edition)

Cross posted from Pelto’s Point at New Haven Advocate

As the details of Governor Malloy’s proposed budget are better understood; the positive and negative elements of the budget plan will continue to surface.

Overall, Malloy’s General Fund budget only increases the level of state spending by 1.8 percent, an extraordinary achievement considering the many pressures and challenges that face the state.  The budget also includes some major transportation initiatives that mean when the Transportation Fund portion of the budget is added in to the total the overall state budget is proposed to grow by 2.4 percent.

Malloy resolves the $3.4 billion dollar hole in next year’s budget with about $1.9 billion in new net revenue (including additional federal aid), $420 million in net budget cuts and $1 billion in state employee concessions.

Putting aside the very real problems associated with trying to cut $1 billion from what the state spends on its employees (without massive layoffs), some portions of the proposed budget are increased while others face relatively minor to major cuts.

Over the coming weeks more of these increases and decreases will be highlighted but here are a few of the more interesting additions and cuts.

Although most municipal aid is preserved at present levels, the budget cuts $48 million by eliminating the Payment –in-Lieu of Taxes (PILOT) for Manufacturing Machinery and Equipment.  This funding was provided  to towns to reimburse them for a portion of the taxes they lose since businesses don’t have to pay property tax on certain machinery and equipment.  It is a relatively small hit but does shift the cost of subsidizing the investment in manufacturing from the state to the local property tax payers in those towns with manufacturing companies.

At the same time, the budget adds $15 million for Tourism marketing for the state.

Among the cuts is $6 million due to the anticipated consolidation of campus settings at Southbury Training School and the closure of 5 public group homes for the developmentally disabled.

One cut that is likely to generate a lot of agitation is a proposal to cut $2 million from the monthly personal needs allowance for Medicaid residents of nursing homes, chronic disease hospitals and long term care facilities.  As the law now applies, all social security payments and pension payments must be turned over to pay for their care except for $69 a month so that they can buy necessary items.  The Malloy budget would change the law so that residents and patients can keep no more than $60.

Eliminating non-emergency dental services and reducing vision care services for poor adults (those who receive Medicaid) would save another $12 million

While Public Higher Education gets cut for about $70 million dollars in cuts, funding for primary and secondary education expands including $3 million more to expand enrollment at charter schools and $42 million to expand enrollment at magnet schools.

A number of changes are also made to the prison system including what appears to be the closure of another prison and an interesting $10 million reduction that the Governor’s budget describes as resulting from an “unspecified schedule change for Correction Officers and Correctional Lieutenants.”

A good detailed budget summary can be found at the Office of Fiscal Analysis – Malloy Budget Proposal.

In addition, for an alternative view of budget issues, check out a new blog by Heath Fahle at The Wonk Blog.

If you have specific questions about the budget plan, please send them along or post them in the comment section.

Challenging the “Prescribed Path” is not disloyalty

The importance of debate:  Even (no especially) in times of great strife and turmoil

Following the extension of the Bush Tax Cuts, President Obama this week released his $3.7 Trillion dollar Federal budget, a budget that lowers domestic spending to Eisenhower levels by cutting hundreds of vital programs;  basically maintains defense spending unaltered and includes a $1.7 Trillion dollar deficit.

Republicans reacted by blasting him and the Democrats as “big spenders” – despite the fact that while their proposals cut different programs had virtually the exact same bottom line.  Watch last night’s Daily Show for a funny, yet shockingly accurate assessment of the Republican’s reaction. (http://www.thedailyshow.com/#tool_tip_1)

Meanwhile, here in Connecticut Governor Malloy proposes a budget that has the deepest budgets in Connecticut history, along with an unattainable demand from Connecticut’s public employees and record tax increases.

 The response:   Republicans react by blasting him and the Democrats as big spenders – but in this case they don’t even have the willingness to put forward any ideas except to complain that more taxes are not the answer.

Meanwhile, both in Washington and here at home, the response from the Democrats has ranged from accolades for the courage to cut spending, acceptance of the inevitability that we are headed into an extended or permanent period in which we recognize “government is the enemy” or quiet desperation that the political environment gives the Democrats no other options.

There is no question that reasonable people can certainly disagree on the best course of action for the nation and state, as well as, what will or won’t work when it comes to re-energizing the economy.  However, I fundamentally reject the notion that the path laid out by President Obama or Governor Malloy is necessarily the best path and I’m even more certain that raising questions, concerns and objections is not only allowable but a healthy and necessary part of the process.

In some ways, the reaction to the concerns and objections that I and others have raised is even more surprising than the path our leaders have laid out for their respective jurisdictions.  One Courant columnist opined that Malloy must be on the right path because “liberals” like myself were unhappy with some of his proposals.  On a more micro-level, my Facebook posts on the budget have generated numerous responses that suggest we Democrats should give the new Governor our support by refraining from being critical.  Some have even suggested that my complaints and concerns are not only disloyal but serve to undermine the Governor and the good work he is doing and will lead to even further damage to the programs that we care so deeply about.

The importance of teamwork should never be denigrated and facing the reality of the situation Connecticut faces is of paramount importance, but criticism, concern,  and debate is not, in and of itself, an act of disloyalty.  In fact, I would argue that it is exactly the opposite.

Neither the President nor the Governor has cornered the market on determining what is the best course of action.  In this case, the President was wrong to support the Bush Tax Cuts and the Governor is wrong to back off the need to get Connecticut’s wealthy to pay their fair share.

In addition, some of the proposed cuts in Washington and Harford should be rejected flat out and others modified to reduce some of the negative consequences.

The time has come – in Washington and in Hartford – to face the ramifications of failed tax and spending policies.  A new age is upon us that requires a significant transformation in the way government works and what government should and should not do. 

But only through real, fact-based and sometimes difficult and uncomfortable discussion can we hope to find the best paths forward.

Pointing out where the President and the Governor are going wrong is not an act of disloyalty, but exactly the opposite.