The unfunded liability of Connecticut’s pension system is reported at $16 billion, an amount nearly as large as the state’s entire annual budget. Other analysts compute the state’s real unfunded liability at three times this amount. It is impossible to wring money out of an empty wallet. Sober state and national governments, mindful of their budget deficits and unfunded liabilities, should realize they cannot afford to continue to support such debt levels. On both federal and state levels, however, big spenders are simply hooked on spending. The notion that federal and state governments can spend their way out of recessions is one of the undying fables of poorly remembered recessions of times past. .
At a minimum, these liabilities suggest that while the federal government is not in a position to bail out Connecticut, neither is Connecticut in a position to be able to assume more debt. President Ronald Reagan, one of the best aphorists in the modern presidency, put it this way: “Government is like a baby: an alimentary canal with a big appetite on one end, and no responsibility on the other.”
Even though the figures are -- to put it mildly -- depressing, Panglossian optimists are everywhere. Office of Policy and Management Secretary Benjamin Barnes, Mr. Malloy’s budget director, has not battened down every hatch against the coming storm.
"I'm pretty confident,” he has said, “that the steps we've taken will allow us to sustain balance over a long period of time.”
This was offered as a sufficient answer to well-founded misgivings expressed in the CTMirror story. The concession package negotiated between SEBAC, a coalition of unionized state workers, and the Malloy administration lacks “an out-clause to cope with fiscal emergencies.” The absence of such a clause, in combination with “a four-year prohibition against union worker layoffs” and a guaranteed three year raise following a pay freeze of two years, will leave the state in a precarious position should national and state finances bend towards a double dip recession, as seems likely.
Even Mr. Malloy’s predecessor, the much derided “Snow White” governor, was not so incautious as to remove from the gubernatorial tool box a provision that would have allowed additional cost-saving measures should state revenues fall below a threshold level or should the budget dip below a manageable deficit floor. Mr. Malloy has committed himself to a no-layoff pledge and a 9 percent, three year increase for SEBAC union members who voted in favor of his revised Plan A budget. These contractual commitments could be an expensive pay off should the national and state economies continue to founder.
“…decades of contractual promises made to unionized workers, including no-layoff clauses, are increasing the post office’s costs. Labor represents 80 percent of the agency’s expenses, compared with 53 percent at United Parcel Service and 32 percent at FedEx, its two biggest private competitors. Postal workers also receive more generous health benefits than most other federal employees.”