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State Employee Raises, Not Fiscal Guardrails, Put Squeeze on Spending


Lamont is No Fiscal Conservative

There’s a fight brewing within the ranks of Democrats in Hartford over what changes to make in state budget policy so they can spend more money.

Progressives want to bust the “fiscal guardrails” which both limit spending and redirect billions into the state’s drastically underfunded pension funds. They want to get their hands on the money going into pensions. They want to use that money to spend beyond the guardrails, which are designed to keep spending in line with the state’s economic growth.

Governor Lamont, who postures as a fiscal conservative, wants to preserve the guardrails – kind of – and borrow more on Wall Street to fund more spending. In order to spend the borrowed money, he too would have to exceed the limits, or evade them somehow with “creative accounting.”

Progressives have misdiagnosed the problem. Lamont has caused the problem. The obstacle to more spending is not the fiscal guardrails, but rather the 33% increase in wages that Lamont has lavished on state employees.

Under Lamont, unionized state employee wages have grown $1.1 billion from $3.4 billion annually when he first took office in 2019 to $4.5 billion last fiscal year, as catalogued in the latest report of the pension fund actuary.

If progressives want to spend more money, they need to freeze state employee wages. 

Moreover, progressives need to embrace the reality that Lamont has wasted most of the money that has gone into the pension funds – wasted the $6 billion redirected into the state employee pension fund (SERS). Because pensions are based upon wages, when you increase wages, you increase future pension liabilities. Lamont’s lavish 33% raise for unionized state employees has increased SERS future obligations by $9 billion.

Freezing state employee wages would halt the surge both in current wage costs and in future pension obligations and yield billions of spending capacity.

Lamont has bragged about making “progress on pensions,” based upon the extra $6 billion deposited into SERS via the key “guardrail,” the Volatility Cap. Yes, SERS assets have increased. But the $11 billion increase has only slightly outpaced the $9 billion increase SERS liabilities fueled by Lamont’s wage awards. Net progress has been only $2 billion over six years. The net liability has barely decreased — from $21 billion to $19 billion.

Lamont lives in terror of the specter of his predecessor, Democrat Dannel Malloy, a genuine fiscal conservative, who understood all this and imposed wage freezes on state employees in three years of his eight-year tenure.

Progressive Democrats are focused upon the Volatility Cap, which they have taken to calling a “Roadblock,” etc. They are misguided.

Rumor has it that Lamont wants to compromise with progressives, pushing them to agree to another wage increase of “only” 2.5%. It is not clear whether this would include the 2% built-in annual bump called “step increases.” In aggregate, a 2.5% total wage increase would eat up $300 million more in the upcoming two-year budget – and would push annual unionized state employee wage costs to a cool $5.0 billion two years later, a cumulative $0.5 billion increase. That’s just wages. That’s a lot of money every year, now and hereafter.

Progressives need to focus on the union bosses of SEBAC, the state employee union. SEBAC bosses – supposed allies of Democrats — have flimflammed Lamont for unfair and unsustainable wage increases. This session the bosses will be at it again. Past and potential wage increases have fattened state employee bank accounts and stiffed the working class, once the Democrats’ core constituency. If progressives want to provide for the state’s working class and its “most needy,” they need to oppose the unions. SEBAC is not their ally – far from it.

Lamont, of course, doesn’t want anyone to focus on any of this. He is no fiscal conservative, not when he caves to outrageous union wage demands and borrows money to fuel more spending. He claims the borrowing is for the special transportation fund, but the STF had a budget reserve of almost $1 billion last fiscal year. Money is fungible, so the borrowed money is likely to show up elsewhere in increased spending.

Lamont is a classic free-spending Democrat. He has spent lavishly on his union allies; he needs them to be re-elected for the third term that he is rumored to want badly. He has been a pinchpenny to the working class.

The fact is that Connecticut state employees enjoy the second highest wages, the most generous health care benefits by far and pension benefits ranking in the top quartile of the 50 states – in a state that ranks at the absolute bottom in term of fiscal condition. Lamont clothes himself in the mantle of fiscal conservative; in reality, Lamont is the emperor wearing no clothes.

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