Connecticut taxpayers, saddled with a pension system for state workers and teachers marked by decades of underfunding, glimpsed a ray of hope in 2017 when legislators embarked on a path toward accountability and fiscal discipline by enacting “fiscal guardrails.”
Now, state unions under the umbrella of the State Employees Bargaining Agent Coalition are clamoring for the removal of the fiscal guardrails that were constructed to prevent the same unions from driving taxpayers over the cliff. The staggering state debt of more than $80 billion, including unfunded pension debt from the state workers’ and teachers’ pension funds, bonded debt, and health-care liabilities, was the result of years of irresponsibility and political horse-trading with state unions that were all too eager to negotiate benefits without a sustainable funding plan.
As a former municipal union president, I have never witnessed a municipal-level union advocating anything less than full funding by local elected officials for their members’ retirement benefits. This is not the case for state unions, however, which have repeatedly betrayed their members’ trust by negotiating both to supersede state law and to intentionally underfund pensions.
Union bureaucrats understand that regardless of the pensions’ funding, the taxpayers will be on the hook because of contractual obligations. While this protects senior members’ benefits, it results in selling out new members in subsequent agreements that will see benefits rightfully ratcheted down.
In 1971, Connecticut enacted a law mandating the full annual contribution by the state toward pensions and unfunded liabilities by 1985. This commitment would have spared the state its current crushing pension debt. Unfortunately, subsequent deals and collective-bargaining agreements negotiated with multiple governors of both parties ignored prudent financial advice from actuaries and allowed the contracts to override state law.
Connecticut has long been a high-income per capita state and also imposes one of the country’s most burdensome tax systems. Yet it still managed to accumulate the highest state debt per resident. The 2017 bipartisan fiscal guardrails constituted a recognition that the previous decade’s cycle of budget shortfalls, followed by significant tax increases, was simply unsustainable.
The guardrails were codified in 2023, and the general assembly unanimously voted to extend them for another five years. Their very effectiveness in slowing spending growth has made them susceptible to attack from state unions.
The fiscal guardrails established a series of sound principles to limit excessive government-spending growth. The spending cap prohibits the general assembly from spending more than the state’s growth in personal income or the rate of inflation, whichever is greater; the revenue cap creates an annual “cushion” for the state budget, as spending cannot exceed 98.75 percent of expected revenues; the volatility cap allocates annual revenue from sporadic investment incomes and pass-through entities above $3.15 billion to the state’s rainy-day fund, pension obligations, and other long-term debts; and the debt limits keep general-obligation-bond issuances under $2 billion annually, adjusted for inflation, and don’t allow debt to exceed 1.6 times the estimated general-fund revenue for that year.
As Albert Einstein stated, “we cannot solve our problems with the same thinking we used when we created them.” Arguing for the guardrails’ removal exposes the same limited mind-set that led to years of flatlined economic growth in Connecticut. Connecticut comptroller Sean Scanlon and other bipartisan leaders have likewise noted that undoing these positive reforms would assuredly upend Connecticut’s recent momentum toward fiscal stability and economic growth.
The guardrails have sent a clear signal to the private sector that Connecticut is serious about tackling its long-term debts and decreasing tax burdens. They also incentivize the governor to negotiate labor contracts responsibly, balancing the interests of workers and the taxpayers rather than simply capitulating to the demands of our state’s most powerful special interest. Equally important, they motivate policy-makers to embrace pro-growth economic policies, as increased income for Constitution State residents is the most direct way that politicians can collect more money to spend on their pet projects.
State-government unions need to accept that their success is dictated by the growth of the economy. And legislators should heed the lessons of the past. Everyone knows what caused the problems that have inhibited our state’s progress, and we’ve implemented a bipartisan reform that helps us move in a better direction. Dismantling that reform now will only reverse our hard-won gains. For Connecticut to thrive economically, policy-makers must summon the discipline to stay the course. The lessons of history remind us that the path to prosperity lies in responsible governance and unwavering commitment to accountability and fiscal prudence.
Frank Ricci is a labor fellow at the Yankee Institute, past president of the New Haven, Conn., local of the International Association of Fire Fighters union, and a retired battalion chief. He was the lead plaintiff in the landmark Supreme Court case Ricci v. DeStefano. He is the author of Command Presence. Bryce Chinault is the director of external affairs at the Yankee Institute. He earned his Master of Public Policy degree from George Mason University and has a decade of experience in federal- and state-level policy analysis at the George Washington University Regulatory Studies Center and the Mercatus Center at George Mason University.
