Saturday, October 10, 2015

Yankee Study Points Way To State Recovery

A recent Yankee Institute study – “Unequal Pay: Public Vs. Private Sector Compensation in Connecticut” – provides a data foundation that supports what everyone writing about budgets in the State of Connecticut has known for many years.

The study shows that while the average non-tax supported worker in Connecticut earns a slightly higher salary than his state employee counterpart, benefits received by state employees far outpace those in the private sector by a ratio of about two to one. According to the study, total compensation for state employees, which includes salary and benefits, exceeds similar compensation for non-government workers in the state by at least 25 percent.

President of the Yankee Institute Carol Platt Liebau put the principal takeaway from the study pithily when she said, “Connecticut needs a return to fairness. The same workers who earn less than state employees are facing more than $1 billion in new taxes this year, much of which goes to compensate state workers. Bringing state compensation in line with non-government earnings would save the state between $1.4 and $2.5 billion, depending on the assumptions used.”

Even including the two major tax increases of the Malloy administration, the first and second largest in state history,  Connecticut’s chronic out-of-balance budgets are frequently in arrears. Temporary patches have not prevented recurring deficits, and a recent move to impose a furlough on some state workers is at best a temporary expedient that will do nothing to repair the hole in Connecticut’s revenue bucket. The projected savings mentioned by Ms. Liebau would do much to staunch the red ink flow which, Mr. Malloy’s budget chief Ben Barnes continues to remind us, may be a fixed feature of Connecticut’s economic universe for some time to come. The state’s recurring deficits are caused by excessive spending. In the absence of other major tax increases, any solution that does not include long term spending cuts can only be a temporary palliative.

Of course, any attempt to level the compensation playing field between state employees and private workers -- most sensibly by reducing state benefits for new employees, thus rendering less likely additional future tax increases, which in Connecticut have been accompanied by anemic job growth and business flight -- is bound to produce considerable push-back from state unions and their enablers in Connecticut’s Democratic dominated General Assembly. Mr. Malloy has in the past advertised his solidarity with problem-causing union demands by marching in picket lines with unionized workers, and he has shouted down most attempts at leveling the compensation playing field as a virulent form of creeping Scott-Walkerism. Mr. Walker is the governor of Wisconsin, and a cloven-footed devil among the leadership of state union workers.

Mr. Malloy on the other hand has given indications he means to keep the promise he made to hard-hit taxpayers during his first term, a pledge he renewed unambiguously during his re-election campaign, that further tax increases would not be necessary to balance his budgets. The state budget should be reduced by about $1.5 billion or more; long-term spending cuts would seem to be Mr. Malloy’s only viable option.  You cannot continue to take revenue from a diminished pot of resources, and the pot in Connecticut has been depleted by revenue raids conducted by progressives. State revenue has been shrinking because the state’s economy, “the rising tide that lifts all the boats” to employ John Kennedy’s formulation, has for many years been eroding in response to crippling regulations, high taxes and a punishing economic uncertainty that can be traced to an unwillingness on the part of the ruling party to implement long-term solutions to chronic dislocations, both social and economic.

Temporary fixes are needlessly destructive. Policy Director of the Yankee Institute for Public Policy Suzanne Bates notes in a column she wrote for CTNewsJunkie, “There are two choices — freeze or lower pay increases until parity is achieved, or reopen the SEBAC agreement to address pension and health benefits.”

In order to discharge the most recent deficit, Mr. Malloy has reduced in one of his frequent rescissions the amount of tax resources usually given to state hospitals. Asked earlier why he was plundering hospitals to balance his budget, Mr. Barnes replied in the accents of bank robber Willy Sutton, “because that’s where the money is." The real money is locked in state union contracts.

Patterning himself after “bread and circus” Roman emperors, Mr. Malloy has launched a 30 year $100 billion infrastructure and transportation improvement venture, promising to secure such funds as are necessary over the years to pay for his legacy achievement by imprisoning them in an unraidable lockbox. In the past, similar lockboxes have been used by governors as slush funds to patch budget holes, and it is simply imprudent to tie the hands of future governors thirty years down the road, especially now that the state’s tax revenue well has run dry.

However, if Mr. Malloy is truly interested in preserving his transportation slush fund against General Assembly raiders, he might consider tucking the tax money into an impregnable, unassailable union contract.  
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