Gov. Ned Lamont made much of delivering a budget on time this year. It may have been on time, but it wasn’t balanced, and still isn’t. And tolls wouldn’t balance future budgets, either.
Connecticut citizens may recall that Gov. Lamont promised hundreds of millions in current budgetary savings from a reduction of the state’s current contribution to the State Employees Retirement fund (SERS), without much mentioning that this entails even greater overall pension contributions over the 30-year span of amortization.
This scheme is a classic case of kicking the can down the road, with the can getting bigger in the process. Nevertheless, this past Thursday the governor announced triumphantly that he had union approval of the scheme, which “saves” roughly $2 billion through 2032 (about $270 million in the current two-year budget), but increases costs by almost $5 billion from 2032 to 2047.
The reason the scheme required union approval is that SERS is already drastically underfunded, with assets of only about $13 billion against an estimated liability of about $34 billion. Reduced contributions exacerbate this severe underfunding, putting retiree benefits in potential jeopardy.
In February, Gov. Lamont also promised actual labor savings. Union bosses slapped down that idea, saying they wouldn’t make any concessions. Nevertheless, Lamont included hundreds of millions of these savings in his now-official budget. So far there’s no word of union approval, without which the budget is in deficit.
Another open item in the official budget is the outcome of the long-running litigation with the state’s hospitals. Lamont claims to have reached a settlement. He has reserved about $160 million in the budget for a settlement payment to the hospitals.
The hospital tax is a highly complex affair. However, the apparent $160 million settlement seems a very low amount given that Lamont is extending the hospital tax at $900 million per year, reneging on the commitment of his predecessor Democrat Dannel Malloy to reduce it to $385 million annually.
While the hospitals will not have to pay the full $515 million difference (the federal government will absorb most of it), they will have to shoulder about $185 million.
Why would the hospitals settle their lawsuit for a mere $160 million for past damages, when Lamont is inflicting $370 million in unexpected costs over the next two years? There may be other sweeteners (at what cost and in what budget years). We’ll find out when, as and if the settlement is finalized and the terms are announced.
No wonder Lamont is looking desperately for additional sources of revenue, focusing primarily upon his tolls proposal, surely an ill-fated idea at this point with polls showing about 60 percent of citizens opposed.
Why ill-fated? Because neither anti-tolls Democrats in the General Assembly nor federal officials are likely to approve anything but a drastically scaled back tolling scheme. That wouldn’t produce much revenue, which wouldn’t arrive for five years. By that time, the huge $5 billion-larger pension “can” won’t be very far down the road anymore.
Tolls would face federal skepticism because the federal government doesn’t want states erecting tolls on interstate highways just because they want more revenue. The interstate highway system was built to facilitate transportation, not as a funding mechanism for the states. So, the federal government gives states more federal highway construction funds if they don’t erect tolls, and less if they do.
Little attention has been focused upon this reality in the raging debate about tolls. In contrast, tremendous emphasis has been put upon the notion that out-of-state drivers would pay anywhere from 30-to 40 percent of toll charges. It is not clear that the state would come out ahead in the other-people’s-money game, with reduced federal funding offsetting some or all of toll payments from out-of-state drivers.
The primary exception to long-standing federal anti-tolls policy is an experimental pilot program for tolling systems with congestion pricing, which, of course, must be installed in congested areas. In Connecticut that means primarily lower Fairfield County, since most of I-84 and I-91 and the eastern section of I-95 are seldom congested.
Even a much reduced tolls scheme installed only in lower Fairfield County would need friends in Washington to be approved. Does Connecticut have any friends in Donald Trump’s Washington?
Lamont’s current budget relies on several still-open items. His future budgets rely on an unlikely tolls plan that, even if approved, would be scaled back drastically and produce little revenue. To say that Connecticut’s finances rest on extremely shaky foundations is an understatement.
Red Jahncke is a nationally recognized columnist, who writes about politics and policy. His columns appear in numerous national publications, such as The Wall Street Journal, Bloomberg, and USA Today, as well as many Connecticut newspapers.
If you enjoy the commentary on The Red Line and would like to provide financial support for the site, please subscribe. Also, as a subscriber, you may comment on columns.