Former U.S. Comptroller General David Walker issued written testimony today at a legislative hearing in Hartford in which many speakers condemned the Democratic-written tax package. “The truth is,” Walker asserts, “according to the state’s own Comprehensive Annual Financial Report (CAFR) for Fiscal 2014, Connecticut has the highest liabilities and unfunded pension and retiree health care obligations per taxpayer of any state in the Union.” The Bridgeport resident currently serves as a Senior Strategic Advisor in the Public Sector Practice of PriceWaterhouseCoopers. He was a Republican candidate for lieutenant governor in 2014.
From Walker:
Connecticut is at a critical crossroads and the debate over the Fiscal 2016-17 biennial budget is an important part of deciding which future path our state should take. In the short term, I believe that the budget framework contained in the Roadmap to Prosperity report is preferable to Governor Malloy’s and the Democratic majority’s proposed budgets. For example, contrary to the other two plans, the proposed Republican budget is designed to comply with the state’s Constitutional spending cap and to minimize any additional overall tax burdens. In addition, it restores some proposed cuts that would impose undue burdens on some of our more vulnerable residents and selected municipalities. It considers the need to make more timely, targeted and intelligent investments to improve the state’s critical infrastructure, especially in connection with transportation. It also recognizes that existing state employee compensation arrangements must be restructured in a manner that is fair to state employees and retirees as well as the state’s taxpayers who have to pay the state’s bills. Finally, while, unlike the other two plans, it was intended to be “balanced” without incurring additional borrowing, recent non-partisan analysts say it comes $227 million short due to more recent and lower revenue projections.
Unfortunately, none of the three proposed budgets come close to adequately addressing the serious competitiveness and structural deficit challenges faced by our state. In addition, it is now clearly evident that many elected officials in Hartford are out of touch and out of control. Sadly, it is also evident that some state elected officials are prepared to breach their oath to uphold the Connecticut Constitution in connection with the state spending cap. This is shocking and threatens to make a mockery of the state’s nickname–“The Constitution State.”
The truth is, according to the state’s own Comprehensive Annual Financial Report (CAFR) for Fiscal 2014, Connecticut has the highest liabilities and unfunded pension and retiree health care obligations per taxpayer of any state in the Union. It has among the highest combined tax burdens of any state and is deemed to be one of the least attractive states to do business in. It has a high cost of living and among the highest energy costs in the country, which is a great disincentive for manufacturing within the state. Shockingly, according to a 2014 American Enterprise Institute (AEI) study, most of Connecticut’s state workers make far more in total current and deferred compensation than comparable private sector employees. This is driven in large part by Connecticut’s unreasonable, unaffordable, unsustainable and unfunded pension and retiree health care obligations. These obligations alone exceeded $47 billion at the end of Fiscal 2014.
Connecticut is already a net out-bound state and its tax base is eroding. A closer examination of migration data shows that a disproportionate number of higher income people are leaving the state while inbound residents are likely to be more dependent on public assistance programs. This trend is likely to increase absent a major change in Connecticut’s spending, tax and regulatory policies.
Restoring fiscal sanity and sustainability in Connecticut will require major tax reform, regulatory relief, restructuring of state retirement programs, welfare eligibility and delivery reform, more competitive energy costs, and intelligent infrastructure investments. Achieving these reforms will require extraordinary leadership from the Governor coupled with a major fact-based and solutions-focused public engagement effort. It will also require outside assistance to conduct appropriate benchmarking and options analyses. Success can only be achieved by focusing on a set goals and values that will bring people together and can be used to help identify a set of non-partisan proposals that can achieve bipartisan support. In the interim, Governor Malloy committed in his re-election campaign that he would balance the budget without raising taxes. He also took an oath to uphold the Connecticut Constitution. Therefore, he should make it clear that he will “veto” any budget that the legislature sends to him that violates any of these commitments. His credibility is on the line.
Fortunately, leaders in several states are recognizing that it is only a matter of time before the federal government engages in comprehensive fiscal reforms. The resulting downdraft will serve to exacerbate state fiscal challenges. As a result, these leaders are taking steps to restructure their state finances in a manner that is both equitable and sustainable. Given Connecticut’s poor financial condition and competitive posture, it needs to join this group as soon as possible.
While current attention is focused on the pending biennial budget, the time has come to broaden and raise the fight for Connecticut’s future above short-term and tactical budgets to also focus on the types of higher level, more strategic, and structural reforms that are needed in order to facilitate a dramatic change in course in the Constitution State. This includes granting Connecticut voters the right to recall state elected officials who violate the public trust and/or fail to honor their oath to uphold the Connecticut Constitution. It also includes giving Connecticut voters the right to petition for ballot initiatives on key state policy issues coupled with appropriate safeguards to prevent abuse of this important new right. With regard to the current legislative session, it also means passing HB05886 which will promotes “good government” and “home rule” principles in cities and towns throughout the state.
The people of Connecticut also have a role to play. They should take their voting right more seriously and dedicate themselves to electing more state officials who are committed to the three key principles of transformation, integrity and results. Specifically, we need more elected officials who will acknowledge the need for and commit to support that kind of transformational policy and process reforms needed to change course and create a better future in Connecticut. Leaders who have the integrity to tell the truth, the whole truth, and to honor their oath to the state constitution. Leaders who will judge the effectiveness of state government by the results (outcomes) of related state programs and policies rather than the level of inputs (e.g., spending levels) and outputs (e.g., regulations issued) involved.
Connecticut is a beautiful state with a proud history, a great geographic location, and an excellent quality of life. However, our state is at a critical crossroads and its future is clearly “at risk.” It’s time to recognize this reality and fight to create a better future for our state and its residents. It’s time to quit putting band aids on open wounds. It’s time to treat the disease rather than the symptoms. The time for action is now!
“Compensation arrangements must be restructured in a way that is fair to employees, retirees and taxpayers.” If this ain’t Union busting, what is it?
Walker says he isn’t anti union as long as he can break negotiated contracts, don’t have any problems with unions.
Bob Walsh, you are so right, that is all David Walker has preached since he arrived in Bridgeport, break unions and break negotiated contracts with unions. He wants to do to Connecticut what Scott Walker is doing to Wisconsin.
The world changed in September, 2008. It’s been those negotiated contracts that have put Connecticut in this situation. Critics say union members have been over-promised and the whole thing is unsustainable. Union members say they’re entitled–they earned it and they’re backed by the rule of law. The GA seems determined to avoid the issue while a minority wants Connecticut’s future addressed.
When Dave Walker and his Tea Party buddies start calling on the state to default on its bonded debt, sell off its assets and file for bankruptcy then you will know they are serious. Right now all they want to do is break the Union contracts and preserve all others.
Everyone in this State had best start thinking of themselves as residents of the State rather than union or non because this State will be among the first to default on its debt obligations. We owe more than we have or will have!!!
Bob Walsh needs a clever idea. Here’s mine: use all the $37 billion in Connecticut’s pension fund to retire our debt. Connecticut retirees can claim credit for saving their beloved state’s survival while they start living the unfunded life and the rest of us stop being second-class citizens.
We need to always operate within the parameters of “living within our means.” We should never enter long-term obligations without the wherewithal to repay those bills. We need to stop electing politicians who promise to lower taxes. Throw these people to the wolves. They talk the talk, but never do the walk. We need to hire politicians who spend the taxpayer’s money wisely as if it were their own. We need to find people who choose to run for political office to better their neighbors’ lives, instead of lining their own pockets. This type of politician needs an enlightened educated voter and not the “blowing in the wind” variety who dwells in sound bites and grovels in the worn-out bullshit lines like “I will lower your taxes.” Give me intelligence, wisdom and free thought to do what’s right and you have what’s needed to lead Bridgeport and Connecticut out of the political cesspool that has defined our major parties and our politicians. It’s time for all citizens of Bridgeport to engage in the political process and thoroughly investigate who is best to lead our city and our state into a better future. Bridgeport is on the cusp of greatness. I feel it. Do you? Will you?
It’s interesting Dave Walker and his Tea Party had nothing to say when the U.S. government bailed out Wall Street and the big banks for their bad loans and illegal housing loans and the corporate welfare big business get, did Walker demand that type policy and action stop? He said nothing.
Ron, there is a plethora of both interviews and published articles with Dave Walker and both his opinion and policy recommendations. Here is one where he is against the mortgage bailout.
cei.org/blog/bush-signs-blank-check-costly-mortgage-bailout
Jennifer, thanks, I did look at the site and here is a few things I found: “David M. Walker, the former comptroller general of the United States and head of the Government Accountability Office … said that Mr. Bush might have been unwise to sign the measure. ‘Providing authority to the secretary of the Treasury to extend credit or to buy stock is one that will end up costing the taxpayers tens of billions of dollars.’ Mr. Walker noted that other government interventions in the private market, including a rescue of the Chrysler automobile company had provided an opportunity for taxpayers to profit. But when it comes to the mortgage giants, he said, there is no upside. ‘The way this is structured,’ he said, ‘It’s only a matter of how much the taxpayers are going to lose.'” Jennifer, we’re talking about costing the taxpayers tens of billions of dollars,’ and the strongest thing Walker can say is President “Bush might have been unwise to sign the measure.” Where is his outrage about taxpayers’ money, and where is his outrage about those corporate officials who got huge payouts after the failure of their company, how come their contracts were not broken?
Furthermore here is a little something about the CEI from their site, The Competitive Enterprise Institute’s work on the intersection of business and government builds on a long history of defending capitalism, promoting free enterprise, supporting entrepreneurship, and encouraging innovation. To further those goals, CEI believes business leaders must play a larger role in challenging government intervention and special interest cronyism. That fight is vital–not just for investors and entrepreneurs, but to all of us, who know free markets produce more fair and compassionate outcomes for all people, regardless of their means. The free market system and capitalism has NO loyalty to the American taxpayers or to America, their only concern is the bottom line no matter who gets hurt.
Ron, my point was Walker was very vocal in both print and on many news broadcasts against many of the bail-out policies. He was not silent. Strong arguments and examples of free market and capitalism are made daily by both sides. Both have strong merit, but our government policy is based on capitalism, which is why the debate rages on.
Union members’ promised retirement income has and is being reduced. United Airlines pilots and most recently Major League Baseball players–Dave Walker said fair to all–continue to do nothing and public-sector employees will most likely start getting the same notices of pension reduction. I understand how someone can interpret this as union busting, it can also be seen as a reality check. Start with putting every public-sector employee on the health care exchange, no more Cadillac health insurance, is one of Walker’s solutions. Hardly sounds like an unreasonable or union-busting move.
It’s very sad to see people make emotional comments and engage in personal attacks that have no basis in fact. For example, I have never been a member of the “Tea Party.” News flash, the Tea Party is not a party anyway. Second, I was not CGOTUS when the bailouts and stimulus plans were passed. Nonetheless, I was very critical in my public comments, including in the media, about how they were structured. Finally, I support the right for people to organize and the collective bargaining process for those who decide to organize. I also believe no one has represented the taxpayers in union negotiations in CT for many years. This was especially true in connection with the long-term union agreements reached during the Rowland and Malloy Administrations. As result, unreasonable, unaffordable and unsustainable promises were made and the state has failed to adequately fund its promises. The result is $47 billion plus in unfunded promises that will result in large future tax increases absent an equitable restructuring through the bargaining process in the future. When the public finds out how most state workers make considerably more than comparable private-sector employees in total compensation for jobs that have greater job security, they will not be happy. When they find out CT has the highest average total compensation structure of any state in the nation they will take notice. In addition, if the federal government imposes the additional “Cadillac tax” on the state in 2018 due to its excessively generous retiree health care plan, the taxpayers will get the bill. That would add insult to injury. The concept of equity requires all affected parties be considered, including the taxpayers who pay the bills. It would be great if commenters did some homework and got the facts before expressing their opinions. Let’s all try not to practice the “ready, fire, aim” approach. The stakes are very high for the future of our state and families.
42% more–just Google the subject and many sources confirm.
www .nationalreview.com/agenda/378974/new-aei-paper-almost-every-state-pays-its-employees-more-private-sector-does-jason
Dave: Why don’t you tell it like it is going to be. You know as well as I do that default is coming to this State.
Charlie, apparently Dave believes as you but chooses to select which contracts to void and which ones to leave alone. Void all contracts that have been collectively bargained for with workers. Don’t void tax breaks and bonding packages that aid business because business is the greater good.
And Dave apparently believes it is a good budgeting practice to approve a budget contrary to these mutually agreed-upon contracts if you don’t like unions.
Bib Walsh, Dave Walker wants to turn Connecticut into Scott Walker’s Wisconsin, bust the union and break all their contracts. Bob, have you ever heard Dave Walker speak out against any government bailouts?
Interesting post. Dave Walker speaks to the reality of commitments that cannot be sustained. Others respond with the usual line about honoring collective bargaining agreements as if they were handed down by God. Connecticut is an example of what happens when the harsh reality is ignored. Government employee unions control Democrats in the CT legislature. The result? Unsustainable contracts and taxation so onerous it discourages economic activity. Will the State government employee unions acknowledge the need to deal with unsustainable contracts? Not as long as they own the Democrats with the ability to tax.
“Unfunded” pensions, yes, it’s a problem. Who “unfunded” them? Not the union members, they paid into their pensions with every paycheck. It’s elected administrations that always choose to spend the money elsewhere. Is this why pensioners now should lose what they had planned for their entire working lives? Let’s see some stats on how unfunded the pensions really are. I would really be interested in seeing the “unfunded” pensions of Malloy, Rell, Blumenthal, Himes, all the appointed ones, mayors, selectman … let’s see those stats!
Pretty easy to research. 2010 report from Rell, jump to last page to see underfunded numbers five years ago.
www .ct.gov/opm/lib/opm/secretary/opeb/peb_draft_report_outline_6-23-10_revised.pdf
This report is based on data well before 2010.
State employees (SERS) and Educators/Admin (Teachers Fund) make up the largest number workers, about 175,000, and another 130,000 covered by OPED.
The only reference to actual funding is a study from NASRA citing the totals for all pensions are funded at 58.5%. This is pitiful. This is not anything more than Rell’s “plan” to alleviate the blood letting. Most of this data is old.
I know some of the Bridgeport Civil Service plans were funded well into the 80 and sometimes in the 90% area. That is no longer the case. Current mayor not only underfunds education, but the unions too, they take money out from one, for another. Lots of Peter/Paul going on. Also, they listed three main reasons for this deficit. 1. Long period of underfunding. BOOM. 2. Early retirement incentives. BOOM! 3. Spreading forward the losses, or passing the buck forward. BOOM!!!
2014 Malloy report :
www .governor.ct.gov/malloy/lib/malloy/2014.01.09_opm_debt_reduction_report.pdf
… and from this report. Let’s look at who is contributing more.
Deposits to the OPEB Trust Fund:
• State Contributions: $10 million in FY 2008 and $14.5 million in FY 2011.
• Employee Contributions: $1.4 million in FY 2010, $21.6 million in FY 2011, $25.0 million in FY 2012, and $27.5 million in FY2013. Employee contributions are projected to be $43.5 million in FY2014 and $89.0 million in FY 2015.
Nice!
This is a much more informative report, and will takes some reading.
Thanks for posting the link!
However, you did ask for all the reports, right? And to your point, the retirement fund is becoming a nice pile of $$$. Let’s see if it stays in the proper place.
BARF, seeing as we know each other I will reply. “Willie” Sutton, the famous American bank robber, Sutton is known that he said he robbed banks “because that’s where the money is.” Well, that’s what corporate raiders and cities and states are now doing, they’re raiding union pension funds because that’s where the money is plus you destroy the union.
Still, I would like to see how the pensions are funded compared to each other. Researched by a non-partisan expert. Mr Walker, JML, point me to a place I can research at what percentage each State employee pension is funded, and I will, or try. It is my contention the politicians’ pension are always fully funded, as compared to others. Ya think?
There is this report.
www .governing.com/gov-data/state-pension-funds-retirement-systems-unfunded-liabilities-obligations-data.html
There are a number of City of Bridgeport retirees who write on this site. Most are receiving benefits from Pension Plan A. There are one or two who are receiving benefits from the State MERF plan.
Comments have been made to the effect that pensions are guaranteed or covered by individual contracts, etc. but for the most part that is beyond my research and learning at this time. What I do see in the municipal plans is a lack of retiree representation or input among the Trustees. The time to be concerned is not so much when you are working and contributing and assuming that everything is going OK (though plan assumptions may be so far from reality and asset allocations may not protect downside reality as high returns are pursued in other years). So retirees have no representation, and elected representatives often have little or no knowledge of the long-term expenses of the Defined Benefit plans. No one should feel comfortable while all parties are so far apart in the reality of getting practical results for current workers, former workers now retired and public payments to make up differences. Time will tell.
John Marshall Lee, you make some very good points.
I am a retired employee under Pension Plan B, which was funded highly until the City raided it. The first time they tried, the Trustees denied them. There would be no more contributions since the Plan would end, and the remaining active employees would be added to the State program. Then pressure came from the Finch administration on individual commissioners to allow it. Long-time commissioners resigned, knowing they had no chance of doing the right thing. Once the Board was in line, they let the City take a third of the money so they could pay the state for the new pension … promising to make up any deficits Plan B might have. So what’s gonna happen down the road, can you guess?
BARF,
Thank you for recounting the recent history of the Fire Commission and Trustees. There is an important issue I have raised in OIB writing but have never found knowledge or interest in the subject from other writers.
It is the subject of the former Plan B active fire (or police) personnel who were covered under Plan B and have been transferred into the State MER plan. The Plan B assets that were transferred were the subject of major controversy, enough to have conscientious trustees resign in protest. The funds transferred to the State represented a portion of the necessary assets on which State Trustees can earn income in addition to City payments into the future and employee contributions.
However, public safety employees in Plan B were not able to include overtime earnings for the purpose of applying retirement percentages at time of retirement. If the State plan allows retirement incomes to regard the highest three earning years in a career and then apply 50% as part of the formula, there are more than a few retirees who will be earning twice as much from the State pension as they would have from the City Plan B. Mayor Finch, nor his advisers, have never publicly made a full statement about how that works and what agreement they entered into with the State at the time of the takeover. Do you know? I think it is a serious matter, because if this can has been kicked down the road, there is a more serious judgement day coming. Time will tell.
Why does everybody bash the Tea Party? When has limited government, the free market and liberty become radical?
Ron Mackey, Scott Walker has won two regular elections and one recall election in four years. The citizens obviously agree with him. He has taken Wisconsin out of the red and into the black in less than one term. Conservatism works, we should give it a chance in Connecticut and stop putting politics ahead of the people.
Quentin Dreher, the answer to your question is the Koch brothers and they are right here now pushing charter schools. All you have to do is to Google them and see. For these two men power is all about trying to control America.