Wednesday, November 26, 2014

Connecting Connecticut’s Dots


The deficit is back. Like an aging coquette, it appears and disappears around corners, smiling fetchingly at us: Here today, gone tomorrow, back again the next day.

It appears that the skeletons came out of the closet a few days after Governor Dannel Malloy, the seven members of  Connecticut’s all Democratic U.S. Congressional Delegation, members of the all-Democratic State Constitutional Offices and Democrat legislators who dominate the General Assembly were returned to office. Faced with an “unexpected” state deficit, Ben Barnes, the Head of Governor Malloy's Office of Policy Management, said that Connecticut should perhaps expect chronic deficits in the future, a thunderclap that caught the notice of some papers.

Mr. Barnes may have been mistaken by some, if only for a moment, for Jonathan Gruber, an MIT Don dripping with ivy and one of the architects of President Barack Obama’s Health Care initiative. Mr. Gruber is on record as having said in various venues that Obamacare was intentionally deceiving -- necessarily so because most Americans, who are far less bright than MIT professors, would have rejected Obamacare had its architects been more honest than either Gruber or Obama.

It’s true that Henry Mencken once said no one ever lost money by underestimating the intelligence of the great masses of the plain people, but one expects that sort of thing from a scourge of democracy. One expects genuflections in the direction of all things democratic from office holders, particularly Presidents and their Ivy League factotums. Mr. Gruber is to be congratulated for blurting out the truth about Obamacare. In a like manner, Barnes blurted out the truth about Connecticut’s budgets when he said Connecticut’s deficits had become chronic. They are chronic for the most part because governors and legislators past and present have not cut spending sufficiently.

Days after the elections, some voters may be asking themselves whether there should be a price to pay for naked campaign fraudulence. Malloy said no, there would be no deficits, and now we have a deficit in the current fiscal year approaching $100 million, perhaps more, according to Republicans. Further down the road, the state is confronting a deficit of about $2.8 billion for the next biennial budget. Only 42.3 percent of The State Employees' Retirement System (SERS) was funded as of 2012 and 58 percent was unfunded.  An 80 percent funded, 20 percent unfunded ratio is considered healthy; Connecticut is one of only nine states that have a ratio of less than 60 percent. The state’s long term debt, at around $65 billion, is daunting.

If justice and truth were in perfect alignment, all political shift-shapers would hang. But that is almost never the case. Sweet talking incumbents are rarely voted out of office. In safe districts, their tenure is more secure, if such a thing can be imagined, even than public school teachers. It’s hard not to feel a tinge of compassion for Gruber and Barnes. Gruber’s dalliance with the truth will cost him dearly. The bright side for him is that he will be paying less in taxes on his future diminished income. Mr. Malloy won’t fire Barnes, but someone near to the governor might well take him to the woodshed and spank his fanny. Likely, someone already has got to Mr. Barnes with the message: In the future, be more obscure!

Connecticut’s recurring deficit is only dot 1 in a puzzling series of dots rarely connected by the state’s perennially misled voters.

Consider dot 2: More than three years ago, Gregory Hayes, United Technologies Corp.'s (UTC) Chief Financial Officer (CFO), told a group of Wall Street investment analysts "Anyplace outside of Connecticut is low-cost," which certainly is true enough. Connecticut’s high taxes and its tar pit of regulations punish homegrown entrepreneurs. Hayes added ominously, “Even if work has to stay in the U.S., there are opportunities to reduce cost by moving out of those high-cost locations.”

Apparently, the CFO’s nod in the direction of what might be called, with a bow towards Otto Von Bismarck, “business realpolitik” spooked crony capitalists in the Malloy administration because, sometime later, UTC was added to the list of companies in Connecticut given special deals that resulted in tax abatements and other preferments. Pfizer pulled up stakes when its preferment’s ran out, and UBS, petted and stroked by both former Governor Rell and Malloy, has not met prior commitments, according to which the company was to retain 2,000 employees in Stamford, reduced from 4,200 more than ten years ago, in exchange for $20 million in tax funds that, some think, might have been better spent on Connecticut’s three social service agencies -- the Department of Children and Families, the Department of Developmental Services and the Department of Mental Health and Addiction Services – which assist Connecticut’s orphaned and abused children as well as the state's mentally retarded and mentally ill. The operations of all three agencies were cut by the Malloy administration.

During his campaign for re-election Governor Dannel Malloy boasted that, were it not for his speedy intervention last February, UTC might well have taken flight to “anyplace outside Connecticut,” where business costs are more manageable. In his campaign, Mr. Malloy flouted proudly the red feather in his cap and allowed that a deal struck between himself and UTC head honcho Chairman and Chief Executive Louis R. Chênevert would anchor certain divisions of UTC in Connecticut for (ten) years at a cost of $400 million in tax breaks .

Mr. Chenevert recently and unaccountably bumped himself off as Chairman and CEO of UTC. His replacement is -- drum roll, please – Mr. Hayes. Business experts have speculated that the chief area of disagreement between the outgoing and incoming CEO centers on the question “whether to keep the company's building systems and aerospace units together or to break them up. Chênevert, once president of Pratt&Whitney in East Hartford, preferred to hold the company together, and his resignation could be a sign that the board will pursue a split."  Based in Hartford, UTC employs 26,000 workers in Connecticut, mostly at Pratt & Whitney, Sikorsky and Hamilton Sundstrand.


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