Lee Elci: All right. Welcome back. 38 minutes after the hour of 8:00 on Wednesday. Same bad time. We are joined by our pal Red Jahncke. The-red-line.com is where you can find his website and the columns that he writes. Of course. They come up in the Connecticut Examiner, some other places, including the Wall Street Journal. We welcome Red to the program. Good morning. Red, how are you today?
Red Jahncke: Hey. Good morning Lee. How are you?
Lee Elci: I’m doing okay. So I was going to start this, the ghost of Malloy, fiscal discipline, and a haunting legacy. So your columns, you’ve you know, you’ve contrasted that, Governor Lamont’s lavish 33% wage hikes, again, with the former governors imposition of three wage freezes as a rare act of fiscal courage. Where where are we with that now?
Red Jahncke: If we went back in a time machine — what is it, seven, eight, nine years now? The concept that you and I would be praising Dannel Malloy, an arch Democrat, would, would seem as if we were Rip Van Winkle coming back from 20 years sleep with no idea what was going on. But the fact is Malloy took the action that was required at the time. Lamont is ducking and dodging and bobbing and weaving and will not take responsibility. It’s really quite amazing. The Democrats are in this incredible intraparty battle over what’s getting squeezed out of the budget and what’s not. Lamont is taking one item after another off budget, which is a violation not only of the fiscal guardrails, but it’s a violation of good budgeting practice. I mean, what’s the point of a budget if every time you want to spend more, you just go off budget and spend it off budget?
Lee Elci: You also mentioned that the pensions are ballooning nine billion dollars under Lamont.
Red Jahncke: Well, what’s happened under Lamont, of course, is a 33% wage increase that translates almost precisely into a 33% increase in future pension liabilities. Why? Pensions are calculated off the wage base. When you raise the wage base, you are increasing future pension obligations. So yes, the future pension obligations have gone up $9 billion. Now, when the new valuation report came out, Lamont, his Comptroller, John Scanlon and, Eric Russell, the Treasurer, all had a celebration because the assets in the pension fund had increased. So the assets over Lamont’s time in office have increased $11 billion. Liabilities are up nine. The net progress is only $2 billion.
Now, let me point something out that may be very relevant and topical right now. The assets go up and down. Those assets have gone up for two reasons. One, the ginormous amount of tax revenue from investors who live in this state. As the stock market has skyrocketed — which it is not doing right now — special deposits into the pension fund from those tax revenue over the course of this time, an extra 6 billion. Had we not had that money? Simple math. The assets in the pension plan would increased $5 billion against a $9 billion increase in the pension liabilities. We would have been going backwards. We could be going backward today. The stock market is down. Had its worst month in March. Some commentators say you have to go back to the 1980s to find as bad month.
Lee Elci: So is it a ticking time bomb? I mean, we’ve talked about this in the past, and if so, what happens when it goes boom?
Red Jahncke: Well, again, it’s simple. The assets are ballooning on paper. Anyone listening right now who looked at their portfolio a month ago, a month and a half ago — their 401 K — and looks at it today, that value is down substantially. That’s happening to pension fund assets right now. It’s not all in cash. It’s invested heavily in the stock market. So pension fund assets are disappearing as we speak. The pension obligations do not come down. They are legal obligations to the pension beneficiaries and they will be defended in court.
Lee Elci: Does that mean, though, that their only option if that comes to pass is a tax increase? I would think, right?
Red Jahncke: The population of retirees is now somewhat more than 57,000. We have about 49,000 active state employees. So let’s just put that ratio in perspective. When there’s a debate about Social Security, people are alarmed because the ratio of workers to beneficiaries has dipped below 3 to 1. In this case we’ve got 49,000 to get 57,000. We’ve got, what’s the math, about 0.75 workers per beneficiary. And that does not concern people? That does not lead Ned Lamont to the obvious conclusion that this has to be reined in. And the number one thing you can do — that’s very simple and straightforward — is freeze wages. And that must be done.
Lee Elci: Red Jahncke is with us. You just mentioned the wage freeze. So there’s a bit of a battle. Maybe you can explain it. You’ve noted the tensions between the state employees and the underfunded nonprofits. How does that play into this whole thing?
Red Jahncke: Well, the state, both pays its own employees in various agencies to provide social services to those in need. It also sends money to private nonprofits who also provide such services. Well, if you’re on the state payroll, you make a lot of money. If you’re at a nonprofit, they scrimp by. So, you know, there is a tension there. And I’m not going to try and, you know, suggest a solution. That’s for the Democrats. Let them figure out how to deal with the basic unfairness of people doing substantially the same jobs being paid substantially different amounts of money
Lee Elci: Red, one more for me on this for today, Connecticut’s so-called Comeback. You’ve written about this.
Red Jahncke: I don’t know how you you characterize, the state’s performance as a comeback. The state’s long term obligations remain in the high 80s, low $90 billion — the highest per capita amount in the country. And here we’re paying state employees top dollar. You know, it’s just that just doesn’t hold up.
Lee Elci: Hey, hockey. Where are we at?
Red Jahncke: Yeah, in the Western Conference, four teams have been eliminated. East is much more competitive. There’s no team that’s out of the running, mathematically. You can point to the laggard and say: you have to have the sun, the moon, and the stars line up for that team to make it. But mathematically, they’re still in the hunt.
Lee Elci: And did this guy break Gretzky’s record?
Red Jahncke: He’s four goals away. Alexander Ovechkin four goals. It’s really quite amazing. But Gretzky’s not going to be knocked off the pedestal. Because, along with his 894 goals, he’s got a gajillion assists. He was an amazing magical playmaker.
Lee Elci: So I saw this interesting meme NFL players took a knee, MLB players took a knee. And, then, when America was confronted by Canadian hockey fans, the hockey players went out and got in a fight over it. So they, you know, they they stood their ground for America, which I thought said a lot about the hockey players.
Red Jahncke: Well, yeah. It was a very passionate series. You’re talking about the Four Nations.
Lee Elci: Yeah, yeah, yeah. That was kind of neat. Yeah, went out and fought for their country. That was when the Canadians were booing our national anthem. Right.
Red Jahncke: Right, right, right
Lee Elci: Thank you sir. Have a great day
Red Jahncke: Thanks Lee, appreciate it.
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, USA Today, The Hill, Issues & Insights and National Review as well as many Connecticut newspapers.