Wednesday, November 23, 2016

Permanent Fixes

Connecticut, still in a recession and plagued by crippling deficits and job losses -- 14,900 positions over the last four months, according to Department of Labor figures --  cannot recover its economic standing among neighboring states without enacting major reforms that entail permanent long term cuts in spending.

Any reform that reduces state employee salaries and benefits in Connecticut is a tall hill to climb, because the state of Connecticut and unions are bound by contract law and not, as is the case in Rhode Island, by statutory law. To put it another way,  union and state disputes in Rhode Island are settled by the legislature; in Connecticut, such disputes are settled by the courts. Unlike Connecticut, the Rhode Island legislature controls the destiny of the state through democratic rather than judicial means. Bound by contract law, Connecticut has surrendered to its courts final decisions that should rest with the General Assembly.

Managing Editor of the Journal Inquirer Chris Powell has for years been suggesting an end to binding arbitration, which occurs whenever the state and state unions dispute what has become an inevitable increase in state employee salaries and benefits. Binding arbitration has been a labor cost growth engine that favors union demands over requests – we cannot call them orders by the administrative state – that state unions accept modest reductions in salaries or highly inflated benefits. No one will dispute that the arc of binding arbitration bends upwards in favor of unions.

The arc of state-union contract negotiations also bends upwards in favor of unions, so much so that Connecticut quite literally can no longer lift the weight of its accumulative pension liabilities. The state has been winking at its obligations for decades; for as many years, the state has moved money from dedicated pension funds to general funds to avoid raising taxes or cutting spending. When, taking seriously the notion of dedicated funds, Governor Dannel Malloy began to shuttle tax money into the pension fund, he soon found that he had fewer resources left for, say, Connecticut’s disabled. The crunch finally arrived shortly after Mr. Malloy had raised taxes twice. Facing repeated deficits caused by, among other things, state employee salaries and pension obligations, Mr. Malloy, with apologies to the state’s halt and lame, was forced to cut spending across the board, which ultimately affected services to the truly needy in our state.

Finally, we have all arrived at a sort of equity of misery -- all, however deserving or undeserving, are to suffer a diminution of state services. Our Capitol City, Hartford, is teetering on bankruptcy; it has become politically dangerous to raise taxes again to adjust to what has become a ritualistic anticipation of deficits; and state government finds itself enclosed in what the French use to call “the little ease,” a prison cell craftily constructed in such a way that the prisoner can neither stand up straight, sit comfortably or lie down.

In Rhode Island, the little ease has been eased by pension reforms undertaken – not without fierce opposition – by Democratic Governor Gina Raimondo, who has instituted remarkable changes that will over time reposition her state among competing states in New England. The reforms, championed by Ms. Raimondo in 2011 when she was General Treasurer of Rhode Island, include shifting current and future state workers to hybrid plans with a defined-contribution component, suspending cost of living adjustments, increasing the retirement age of state workers and slashing nearly in half unfunded liabilities. Such reforms, the Wall Street Journal (WSJ) proclaims, “are revolutionary” here in the northeast, where most politicians have for decades tended to operate at the beck and call of state employee unions.

In the WSJ story, “An Island of Rationality in Blue State New England,” Ms. Raimondo asserts that “the reforms were key to giving businesses certainty so they can invest. ‘I’m not going to raise your taxes, and you can believe me,’ she says. That’s something her Connecticut counterpart Dannel Malloy can’t say.”

Ms. Raimondo reformed the way Rhode Island did business with its unions by persuading the legislature to change the statutes that govern what we call in Connecticut collective bargaining. Here in Connecticut, Mr. Malloy is the state’s chief contract negotiator, and any affirmed contract in place can only be changed through collective bargaining, an embarrassing process in which the governor begs unions to accept reforms he and the General Assembly believe will advance the general good. Reforming a previously agreed upon contract is a bit like undoing the Gordion knot, which is why some commentators have called SEBAC, the union conglomerate representing state workers in union-state negotiations, Connecticut’s fourth branch of government.

If it had the spine for it, Connecticut’s cringing state government might make whatever changes are necessary to copy Rhode Island’s union-government model by abandoning binding arbitration and switching from a contract to a statutory bargaining posture. Failing that and facing mounting revenue depreciation, Connecticut can only continue to cut needed services in response to union obduracy. 
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