Talking With CT GOP Chairman Ben Proto About a State Employee Wage Freeze

This is an excerpt of The Right Direction podcast hosted by Ben Proto, Chairman of the CT GOP.

BEN

Welcome to the Right Direction with Connecticut Republican chairman Ben Proto. Join us as we dive deep into the issues affecting Connecticut. Present the solutions that we believe will help our state and its people tackle our biggest challenges.

Welcome back to the Right Direction. Today we got a very special guest, a good friend of mine, a gentleman by the name of Red Jahncke. If you follow Connecticut finances at all, particularly Connecticut governmental finances, you’ve probably read some of Red’s columns in various online and, newspapers across the state and some of our national media outlets.

So, Red, first, welcome to the Right Direction. Great to have you with us. Thank you for being here today.

RED

It’s great to be here and honored to be here with you, Ben. Let’s cover some ground.

BEN

You have The-Red-Line. Tell us about that.

RED

I’m a freelance columnist. I am published in various publications. And when I was asked by friends and colleagues, “I didn’t see your last column. Where can I look at it?” I would have trouble myself remembering where my last column had run.

So, The-Red-Line’s sufficient reason for being is to aggregate my own columns so I can answer that question simply by saying “Go to The-Red-Line.”

The Red Line is: The-[DASH]-Red-[DASH]-Line.com.

Nothing that appears on The-Red-Line has not already appeared in traditional media. Some media outlet. I take pains to point out to people it is not a blog. I write nothing solely for The-Red- Line.

BEN

So, let’s talk about Connecticut and Connecticut finances. You know, we listen to Governor Lamont, we’re on the right track. We’re doing great. Our finances are good, our pension systems good.

RED

Well, the state is one of the most deeply indebted states in the nation. Total indebtedness is about $85 to $90 billion.

We’re in the top five most indebted states in the nation. That has an impact. Taxes, as you know, Ben, have gone up consistently, inexorably, relentlessly over the past two decades. Huge tax increases under former Democrat Governor Dannel Malloy. Ned Lamont, instead of raising the tax rates, has expanded the number of activities and items that are taxed.

BEN

As an attorney. I have to pay what’s called the occupation tax. Every year it’s $525 that every practicing attorney, unless you work for the government, has to pay.

RED

Yeah. If it moves, it’s taxed. That’s a truism in the state of Connecticut.

BEN

In addition, I know one of the big issues that you’ve been talking about are state employee wages in the state of Connecticut. Let’s talk about state employees and what Ned Lamont and the Democrats have done over the last, roughly, six plus years that they’ve been in power.

RED

Let’s go right to the core of that issue. While Ned Lamont has been in office, state employees have received a compound 33% increase in their wages. Six consecutive annual wage increases: beginning 5.5%, 5.5%, and four 4.5% amounts.

BEN

So we’re clear for our listeners, a state employee who, in January of 2019, when Ned Lamont became governor, was earning a $100,000, they’re now making approximately $133,000.

RED

Precisely.

BEN

What has the non government employee wage earner in the state of Connecticut, somebody working in the factory or in the service industry, but basically a private sector job, what have they seen their their pay or their wages increase over that same period of time, roughly.

RED

Nationally, it’s 23%.

If you go to the US Bureau of Labor Statistics on the home page, they have the CPI calculator. You put $1 in on Ned Lamont’s Inauguration date, today that $1 is $1.25. Inflation is 25%. State employees are up 33%. They’ve beaten the private sector. They’ve beaten inflation.

BEN

How does that impact the next piece of this. There’s obviously an increased cost to the state to carry that employee — health benefits, pension benefits, retirement benefits, and the entire state employee benefit package.

RED

Let me put this under a broad header. Ned Lamont is a mythologist. He has been spinning mythology for the public in this state. He has got two ploys. Connecticut Comeback. Connecticut’s real economic growth is less than 1%. There’s no Connecticut Comeback.

The other myth that Ned Lamont has been spinning is “pension progress.” $5 billion has been deposited into the state employees pension fund and frittered away, because the increase in wages has increased future pension obligations by $8 billion.

Future pension obligations have increased from $34.2 to $42 billion. There is no progress on pensions. When Lamont took office, the net unfunded liability was $21.2 billion. It’s $20.1 billion today. We’ve made $1 billion of progress. That’s not progress. It’s just 5% improvement over five years.

That’s for five years. That’s an annual rate of improvement of 1%. How long will it take to arrive at full funding? Do the math. You and I, Ben, won’t live that long.

BEN

In 2017, we imposed, implemented a whole number of fiscal restraints, right, which the Democrats are now feeling very constrained by, because they want to spend more money.

RED

The key restraint among all the fiscal guardrails is what’s called the Volatility Cap. The Volatility Cap takes certain categories of the income tax revenue and diverts it from spending and availability in the budget and sends it to the state employee pension fund with the idea that that diversion will build the funding of the pension fund, improve the funding.

$5 billion has been diverted. No progress has been made. So, for Republicans, it is incredibly frustrating that this financial mechanic, which was well designed to improve pension status in this state, has been completely undermined and offset and negated by the overgenerous compensation that Ned Lamont has awarded state employees.

For the Democrats — this is a bipartisan issue – Democrats had expected, in acceding to this set of mechanisms, that — what is it, 2017 to 2024, seven years down the line — that that mechanism would have improved the condition of the pension fund and the very strict restraints could gradually be relaxed over time, and more of the state’s revenue could flow into the budget, and be spent on programs that they consider important.

That’s why they want to do away with the guardrails. They are mis-targeting. The guardrails are not the problem. The problem is over generous contracts for state employees. Ned Lamont, when negotiating with state labor unions, has been spineless and feckless.

BEN

Don’t hold back. Tell us how you really think about Ned.

RED

Let’s get him on the line.

BEN

When we get him on the show. So, let’s go back a couple of years. What impact did the federal Covid dollars — off budget revenues – [have]. How long will they continue to impact us into the future? If that’s any kind of a logical question to you.

RED

That’s very logical, with a very abrupt answer, which is it ends December 31st of this year. We are four months out from falling off the cliff. The American Rescue Plan, a $2 trillion giveaway by Uncle Sam to states, municipalities and citizens. Any money not spent by the end of this year, by law, has to be sent back to Uncle Sam. Now the state’s going to have to actually live on its own means. The challenge is going to be enormous.

BEN

Now, the question really is, given where we are and given how we got here, is this fixable.

RED

Remarkably easily. Institute a policy that Democratic Governor Dannel Malloy employed during his two terms in office: a wage freeze. State employee wages should be frozen. And this is not just a conceptual issue out in the future. We are in the last year of their current contract. June 30th of next year, the contract expires. There must be a new contract. Its first year or two should impose a wage freeze. That’s how you make pension progress. You stop increasing the pension liability in the future, and all the contributions that go to the pension fund actually make progress.

BEN

So, I think, the comptroller has just released an indication we’re in a surplus situation. We regularly hear about these surpluses, which seem to dissipate over time.

I think when people hear that we have a surplus, they think we’re doing well.

RED

Well, first, on a macro level, our state debt has remained in the high $80 billions. Ned Lamont, has not engineered a Connecticut Comeback in any fiscal and financial sense. The real economy is not growing. If you want to grow the budget, you have to grow the economy. The budget is funded by the economy in this state. If the economy doesn’t grow, the budget cannot grow. If you grow the budget and the economy doesn’t grow, all you can do is raise taxes to pay for more budgeted spending.

The biggest spending item in this state is the state payroll. So, Democrats, if they want to spend, have to rein in at least the runaway increases in state employee compensation. That’s how they can derive the funds to fund the programs that they want to fund. Otherwise, they’re going to be raising taxes on us.

BEN

Do we need to look at revising the state pension plan dollars going forward.

RED

The paradigm historically for public sector compensation in Connecticut and in all 50 states is that public employees accept slightly less salary and wage compensation for much more generous benefits, pension benefits and health care.

BEN

But we’re seeing government employees getting substantially larger pay increases than private sector employees.

Let’s get to a bit of a closing area here. Do we need the wage freeze?

If we were just to stop, you know, giving wage increases, we’re still going to see huge increases in spending in other areas. Right?

RED

Well, first, before we leave state employees, there are three elements to their compensation. We’ve covered wages. They are now making more in wages than private sector workers in the state. With a 33% increase versus 23%, they’ve overtaken private sector.

They’re making more in wages, they’ve got better benefits. We’ve talked about the pensions. What we haven’t talked about are their health care benefits, their retiree health care benefits. Those are unfunded almost completely. Those aggregate about $20 billion. So, the state is in debt $20 billion on pensions, $20 billion on retiree health care and $50 billion bonded debt.

The health care benefits are even more generous. The study that we’ve done in 2022, under the aegis of the Nutmeg Research Initiative, which again, my consulting firm, the Townsend Group oversaw, found that Connecticut state employees’ health care benefits, retiree benefits were the most generous in the nation. Number one. 20% more generous than number two, California. That needs to be reined in. Senator Blumenthal and Senator Murphy are not on the federal employee health care plan. They have kept their Connecticut health care plan.

BEN

So has John Larson and Joe Courtney.

RED

That tells all.

BEN

We’re coming up on the end here. If I gave you two minutes to summarize where we’re at and where we’re going, what would you say?

RED

I would say to Republican candidates for office, make this an issue. A wage freeze merely introduces fairness into the system. By the way, before Ned Lamont took office, 50-state studies showed that Connecticut state employees made another 33% — a different 33% — more than private sector, comparable private sector, employees in this state. So, over the last six years they haven’t been playing catch up. They’ve been going further ahead. That’s fundamentally unfair. Candidates should take that to the electorate, make it an issue.

All GOP candidates should do this. If only 1 or 2 do so, next cycle, the unions will come after them and bury them. If all Republicans carry the flag forward on this issue, they will benefit the state, introduce fairness, and protect themselves from retribution. Because even unions don’t have enough money to target every Republican elected to the General Assembly. If we do this together, we win. If we go one lonely voice at a time, we’ll be snuffed out.

BEN

Absolutely. I think that the issue is tremendously important. It’s a winning issue for Republicans, but more importantly, it’s a winning issue for the people of Connecticut. If we can get this under control, we can stop the outrageous increases.

If we can stop this runaway train, or at least, slow it down, it will help people every day be able to afford to be here, to be able to raise their families here. It’s an issue that we have to really talk about a lot more than we’re doing. I absolutely agree with you that Republicans need to be out there talking about this on a regular basis.

So, Red, again, thanks for being with us. And ladies and gentlemen thanks for being with us.

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