How much money do you think is okay to borrow from your children to pay for your retirement?  Gov. Ned Lamont and the Democratically controlled Connecticut state legislature have decided $27 billion is an acceptable bill to hand to our children – that is billion with a “B.”

The linchpin supporting the recently adopted budget was their decision to postpone $9 billion in payments for teachers’ pensions due in the next few years.  Delaying the payments ultimately increases their cost to $27 billion.  So much for  Lamont’s self-proclaimed “debt diet” for Connecticut.

Numbers this large are hard to comprehend, so let’s take it to a human scale.  Several UConn current and former employees are eligible to collect a pension well into the six-figures.  With less than one-third of the cost for government employee pensions put aside, at least $100,000 will be needed every year to pay for one pension.  In other words, 30 students’ entire $16,000 annual tuition for four years will be spent on just one pension over 20 years – instead of invested in engineering, computer science and other areas that would strengthen our state’s educational system and provide students with a job after graduation.

In the private sector, employers and employees are required by law to put aside enough money each year to pay for benefits.  In government, politicians and union leaders hold themselves to a far different standard.  For years, they permitted themselves to promise state employees and teachers benefits much richer than private sector benefits without requiring workers or the state to put aside enough money to pay for them.

Massive increases in pension costs have led to lower quality of life, a less competitive workforce and higher taxes.  Our roads that once speedily connected our cities and towns are clogged with traffic and our trains to New York City are slower than they were in 1970.  Our once superior workforce increasingly fails to offer employers sufficient workers with high demand skills.  Tax increase after tax increase has raised the burden of state and local taxes from one of the lowest in the region to the second highest in the entire country.

Residents and businesses are voting with their feet.  From 1990 to 2015, Connecticut lost nearly $13 billion in net adjusted gross income from residents leaving to other states.  In the single year of 2016, Connecticut lost $2.6 billion.  At that rate, Connecticut would lose 30 percent of its income in a mere 20 years.

Losses are poised to accelerate.  The cap on federal tax deductibility for state and local taxes has deepened the bite of Connecticut’s high income and property taxes.  Recent steep declines in Connecticut home values portend faster losses.

Famed investor Warren Buffet advises companies to avoid states with big unfunded liabilities, warning that they are likely to raise taxes repeatedly.  Buffet cautioned against investment in Connecticut and Illinois.  Rising taxes, a shortage of skilled workers and enormous unfunded pensions pushed GE out of Connecticut.  The same toxic combination likely played a role in driving out United Technologies, despite their public statements.

We find ourselves here as the consequence of corruption at the heart of our political system.  Government employee unions are the only groups in Connecticut that automatically deduct dues from worker paychecks and deposit them directly into their own bank accounts.  Government unions use these dues to support candidates that will take care of them when elected.

Government employee unions’ power has become so pervasive that the Speaker of the House is a full-time employee of a government employee union.  Unions have used their power to make Connecticut one of only four states in the country that grant unions the power to collectively bargain for state employee benefits.  Government unions negotiate their benefits with a governor they helped elect and have them approved by a legislature led by their own member.

Teachers’ pensions are negotiated in cities and towns, but their cost is borne by the state.  This unusual arrangement was designed by Connecticut politicians to allow their allies in major cities to promise benefits to their teacher union supporters far in excess of what those cities could afford.  Hartford would have gone bankrupt from excessive municipal employee pensions but for a state bailout.

Neighboring Rhode Island provides a cautionary tale about the value of IOU’s for government benefits.  One Rhode Island city filed for bankruptcy collapsing under the weight of pension obligations.  The court imposed major reductions in pensions.  Another Rhode Island town reduced benefits to avoid bankruptcy.  The courts affirmed those reductions despite finding the U.S. Constitution protects those benefits.

This is the season of graduations, including for my oldest daughter from high school.  Let’s come together and agree to a settlement for our unfunded pensions that provides retirement security for our government employees and teachers, fairness for our taxpayers and opportunity for our children to realize their dreams and our families to stay together in Connecticut.

David Stemerman is a businessman and former Republican candidate for governor. 

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8 Comments

  1. Mr. Stemerman is right on the money. I surely hope that he will run again for Governor and use his clear thinking and ideas to try to turn this state around. I would vote for him in a heartbeat.

  2. The state pays for teacher and state employee pensions, and states can’t go bankrupt. So these legal obligations will be met.
    The only issue is how to pay for them.
    The state has negotiated lower and lower pensions for newer employees. So the main cost problem comes from people already retired. That would mean payments escalating to unaffordable numbers (more than $5 billion a year at some point as part of a ~$20+ billion budget), then drop to almost nothing. Spreading out the payments means making them more affordable each year, but the payments are spread over more years.
    So extending the payments is the only realistic answer.
    The charge that government is controlled by unions is also very questionable. The reductions in pension benefits for newer employees are only one example.
    Democrats want to spend money on programs. It’s what they have been elected to do. But there’s a practical limit to how much revenue the state can produce. One way to obtain money is to pay less to employees, especially because they’re unpopular. That’s not a solution, but if you want to muddle through for a couple more years, it looks good.
    State employees contributed a lot to meeting the last deficits. In return, they expected Democrats to obtain enough revenues to stabilize the situation because no more contributions would be made in the 2020 and 2021 budgets. That’s not what happened. The state will continue to muddle along, and state employees will again be asked by Democrats to rescue them.
    That’s not a generous legislature currently. State employees and others will be vulnerable to the scrounging needed to cobble a budget together again and again.

  3. Stemerman is exactly spot on. When the public service unions, who ironically are paid entirely out of private sectors tax revenues control all of the budget levers, this is the result.

    No layoffs, mandated raises, free lifetime healthcare and pensions that haven’t existed in the private sector for 25 years.

    A private sector company would have laid off 30% of its workforce five years ago and continued until expenses were less than revenue.

    Frankly, it’ll never change as the game is rigged in favor of public service unions (which should be outlawed) and big city politics which demand, and get, more and more from the state. From $3 billion in new schools that are half empty and don’t do anything for test scores to brand new police cars, buses and sidewalks that no one uses, the $$’s continue to flow.

  4. We the people are NOT borrowing from our children, the Government is stealing from us AND our children!

  5. Its OK. As long as we tell our kids now up front what there state has done to them and they leave here before the bill us due. The young are already leaving and that is what they need to do. I don’t say this happy. I wish i didn’t. They grew up here. They so love it here but its a dead state now. They have to leave. I would have voted for you too. I thought you did have the best and most realistic plan for us.

  6. With all due respect Mr Stemerman, the thinking and logic that you express here was not only rejected by pro state worker operatives in the Connecticut media but by REPUBLICAN primary voters! You were right all along and the fact that you were the ONLY republican candidate to actually post a plan to address the fiscal betrayal of working people in Connecticut by the the state unions and their bought and paid for minions in the general assembly did little to sway cowardly republican voters. You see, republicans “talk a good game” but they have no stomach for a real fight like the one you proposed and so they presented an empty suit (call him for what he is) as their nominee. His catchy “cut taxes” jingoism was exactly what they wanted to hear, all the of the spoils of war without the fight. Leave them be. With your wealth and desire to effect positive change I would suggest more worthy causes than presiding over Connecticut’s fiscal suicide watch. Just my opinion.

  7. If Rowland and Rell had properly funded both state employee and teacher pensions when they were in power, instead of promoting early retirement programs (for employees) which only made the situation worse, we wouldn’t be in the fix we’re in today. BTW, it’s rich towns like Greenwich and Darien and Wilton which benefit most from offloading teacher pension costs to the state, not the big cities, because that’s where the highest teacher salaries are found.

    Finally, complaining about union members being in the legislature while saying nothing about lawyers (who benefit in private practice from interpreting the laws they’ve passed) or small business people (who negotiated sweet tax deals on LLC pass through revenue) or any other economically advantaged group is really just right-wing union bashing. The people of CT elected the legislature, and the members of the House elected their Speaker. Live with it.

    1. The people who pay the bills have answered and rapidly. Outmigration in CT is second highest in nation.The corporations are following suit as UTC,GE and Aetna have proved. 13 Billion in lost income due to outmigration. Sorry to inform you the people who elected current leaders (inner cities) don’t pay the bills. Those that can afford are getting out. The only reason CT exist is there is no systems in place to file Bankruptcy. We are 120 Billion dollars in unfunded liabilities which equates to 68 k per resident … you live with that

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