CT state capitol tower & domeUpdate: There’s a little news about the Connecticut budget; please see below. And now, on with my original post:

Pardon me, Dear Reader, for another departure from the usual topics of this blog. This is something that desperately needs to be addressed … and since it involves immaturity and irrationality, it’s tangentially relevant to things I usually cover here. So here goes.

Oh, and forgive the length of this post. A lot needs to be said about this — for better or worse. OK, on to it, then!

For those of you not familiar with my home state of Connecticut, the government here is in dire fiscal straits. We face a massive budget deficit, which our government has not yet resolved (cached). Our fiscal year began this July 1, but as yet we have no budget. Our legislature convened this past January, knowing it had just under 6 months to get a budget together, but somehow it never happened. The legislature and governor’s office squandered that time, and did absofuckinglutely nothing whatsoever.

Of course, Connecticut’s government is still running, metaphorically on fumes via executive orders that continue many programs but have halted others. Since then, all that’s happened is a lot of kvetching, bellyaching, hand-wringing, and whining. A series of budget proposals were offered … by the governor, by Democrats in the legislature, and by Republicans. Some of those were revised over the past few months, but nearly all went nowhere. A lot of the inactivity was because the legislature bided its time, waiting until state employees could ratify a “giveback” package which (cached), unfortunately, still left a gaping hole to be filled (cached). With that deal in place — and because of it, lacking any ability to lay off state workers to save money — progress on a budget ground to a halt once again, with the usual sniveling and sniping between parties.

The only meaningful action took place last week, when Connecticut’s legislature, with a dramatic vote in the evenly-divided state Senate (36 seats are split 18-18 between the parties) approved the Republicans’ most recent budget, which has too many cuts (cached) to suit Democratic governor Dannel Malloy‘s fancy, and he’s said he’ll veto it.

Beyond some more sniping, nothing is happening. There are no budget talks. There’s nothing on the horizon, no progress to report. It’s expected Connecticut will begin October without a budget.

The problem is, even if Malloy signed the GOP budget, it would give the Nutmeg State a budget for the next two years … but it wouldn’t solve the state’s deficit problem (cached). It’d just put off the matter of the budget deficit until 2019’s legislative session, when this whole laughable exercise would start all over again.

There’s an underlying problem with state government finances, which neither party is willing to address — and in fact, they’ve worked hard not to address it, for decades now. That underlying problem is Connecticut’s massive liabilities … mainly in the form of pensions and retiree benefits (cached). Put simply, the state failed to fund pensions adequately (for decades), and retirement payments have blossomed over the last several years. Keep in mind that the state pays pensions not only for retired state employees, but also for public school teachers (hired at the municipal level, and by number of regional districts). As “baby boomers” retire, this will only get even worse than it already is — and it’s already sapping the state’s coffers.

The two parties offer the usual two solutions one would expect: Democrats want taxes increased, especially on the wealthy, to confiscatory rates; and Republicans want taxes cut, because supposedly this will cause an economic boom that in turn will increase revenues. Let me be honest: Neither of these is going to work. Tax cuts of the GOP style fail, as the state of Kansas found out — and as that state’s Republicans, who rule there, were recently forced to concede (cached). The Democrats’ scenario — raising rates on millionaires — isn’t much better. It’s not that they can’t afford it, or that they’ll leave the state if their taxes are raised (which is a common GOP contention); it’s that most of Connecticut’s highest earners run hedge funds, which are volatile, and it’s impossible to anticipate what they’ll be paying in, any given year (or quarter, for that matter). At times, they’ve accounted for up to 30% of state revenues (cached). That’s a big chunk of the state’s coffers to have to leave up to such an iffy income stream. Increasing the sales tax rate, or eliminating sales tax exemptions (say, on prescription drugs) would provide a more even, and thus anticipatable, revenue increase, but sales taxes are inherently regressive (cached) and furthermore, as they go up, the return diminishes. Adding (say) 50 basis points on a 7% sales tax generates less added revenue than adding those same 50 basis points on a 5% sales tax.

The only real solution is to cut the liabilities and (somehow) reduce retirement benefit payments. Ostensibly this was supposed to have happened with the “concessions deal” that was worked out in July. However, this deal is a mixed bag, because while it does save some money, it keeps state government employment where it is, which in the long run will tend to keep liabilities high. So it doesn’t really help much. The state’s GOP has said this since it was first negotiated, and although I disagree with them on many things, on this point, they’re correct.

The state’s other major expense — aside from employee wages and benefits — is Medicaid. While it gets some federal matching funds, this too is a major drain on state coffers. The problem is, there isn’t much left to cut here. Medicaid reimbursements have been pared down, little by little, with each budget that’s been passed since the early ’90s. There’s been a contraction in the number of nursing homes, with many of them folding, but the state’s elderly population is not dropping. It’s not that there isn’t any more that might be shaved off … the practice of having Medicaid patients taken to appointments by ambulance, rather than taxi or some other much-cheaper alternative, certainly needs to be changed and can save money. But there’s just not a lot left to be had.

What Connecticut needs are structural changes to its finances, both spending and taxation, as well as the reining in of long-term liabilities and debt. It needs more reliable revenue streams, and spending cuts, including paring down the state’s employment rolls, along with reducing pension payments. An easy start would be an immediate end to the practice of “double-dipping” such as in this case (cached) And that’s but one example … lots of these guys are getting two paychecks from the state. A state employee should either get a payroll check, or a pension check, but never both. The practice of letting them use spikes in overtime ratchet up their pension checks, also needs to end (cached). These are two reforms which would not only save money every year in payroll, but they’d save more than that in pensions, in the long haul. Thinning out the ranks of state employees would also have a similar cascading effect, saving some money in the short term and even more in the future.

Good luck getting that to happen, though. The legislature’s leadership (namely, the Democrats who’re the majority in the House of Representatives) are closely hooked in with the state’s public employee unions. In fact, in his “day job,” House Speaker Joe Aresimowicz is a representative for one of those unions (specifically, AFSCME). Like his federal counterpart, Aresimowicz drives all legislation in his chamber. That practically screams “conflict of interest,” but no one in Hartford has noticed.

There’s yet another consideration: State aid to cities and towns (while Connecticut has counties, they exist only geographically, there are no county governments). This money typically goes toward funding public education, due to a provision in the state constitution (specifically, section 4 of article VIII). There are also PILOT payments (payments in lieu of taxes) which compensate towns and cities for untaxed property (e.g. for buildings owned by the state or non-profits). Over the last 15-20 years these payments have grown, as the cost of education has gone up. Among the bigger elements of that increasing cost are special education budgets, which in many towns and districts have literally exploded.

The governor has pushed to get school districts to begin contributing to teacher pensions (they’ve never had to before), and both parties’ budgets reduce payments to cities and towns. While this helps state finances, unless costs at the municipal level are lowered, all it will do is cause local property taxes to go up — which won’t help Nutmeggers at all. Ultimately, that sort of cost-shifting is also not a viable long-term solution. What needs to happen is that the cost of running municipalities — and for nearly all of them, that’s education — needs to be reduced significantly.

There has been talk of allowing municipalities to impose an extra sales tax of 1% on restaurant bills, which could ease the property tax burden, but … really? Why just restaurants? Why not on everything that has a sales tax? And what about very-small towns that have few or no restaurants? That this provision makes little sense probably explains why it hasn’t been mentioned over the last few weeks. Still, giving towns and cities an added revenue stream, is probably not a bad idea. Not that I’m a fan of new taxes, but property taxes are problematic.

The long and short of it is: Connecticut needs to restructure its government finances. It absolutely needs to happen at the state level, and ought to happen at the municipal level; and it needs to begin now. Not in a few months, or a few weeks — but now! The city of Hartford is at the edge of bankruptcy, and will soon be forced to make changes (cached) — either on its own, or by state or bankruptcy-court order), but really the whole state needs a drastic governmental-financial makeover.

But … knowing this … what are our leaders in Hartford doing? Nothing. Not. One. Single. Fucking. Thing. No budget negotiations are taking place. Not even the individual parties are discussing their next proposals. Nothing is happening — at all. This is an absolute, fucking shame. Everyone in the state Capitol; the governor, both houses of the legislature, and both political parties, appear to have collectively given up.

It’s time for them to get off their whiney little asses and start doing their jobs. Really, they ought to have done their jobs months ago and generated a new, workable budget prior to this past July 1. They ought to be ashamed of themselves for not having met that deadline. But they should be doubly ashamed for having thrown up their hands, now. It’s time for them to get back to fucking work already and do their fucking jobs, fercryinoutloud.

P.S. I will end this by explaining, especially to those of you who aren’t from Connecticut, that the Nutmeg State’s fiscal disaster is not of partisan origin. It wasn’t caused only by one party or the other. Yes, it’s dominated right now by Democrats, having had a Democratic legislature for what seems like ages, and a Democratic governor since January 2011; but we had Republican governors since 1995 (John Rowland, who was convicted of corruption in 2004, then succeeded by his lieutenant governor Jodi Rell, who was elected in her own right in 2006) and prior to that, an ostensible independent (Lowell Weicker) beginning in 1991. Both parties played a part in consistently and repeatedly putting off funding pension and benefit liabilities, and that tendency goes back decades. Thus, elected officials from both parties are responsible for it. That’s both of them. Don’t let anyone convince you this is solely the fault of only one party … because it’s not. By contrast, the fiscal crisis in Kansas is largely the fault of that state’s GOP (cached), and in particular governor Sam Brownback.

Update: It took a couple weeks but Connecticut’s leaders finally decided to try working out a budget. That this is what they should have been doing, back in May and June, doesn’t seem to have occurred to them.

Oh, and despite of all of this, the state’s main teachers’ union is suing the governor to get school funding restored (cached). It doesn’t matter to them that the state’s finances are in the toilet; they just want their fucking money! “Show me the money,” they’re saying. “Show me the money!” I have no idea which stone they plan to bleed in order to get the money they demand, but they’re going to demand it, anyway. I guess.

Photo credit: Wikimedia Commons.

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