Gary Byron: I love it when our next guest joins us. There’s not many conservative columnists. We got a couple of months. Chris Collins comes to mind. This gentleman’s work is on a national level. He is the president of the Townsend Group, a business consulting firm in Greenwich. And he’s also the founder of The-Red-Line.com. 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, and at some point, just about every Connecticut, newspaper. Good morning. It’s Gary Byron. It is 9:11 here on this Tuesday morning. So glad to have you on board the morning train. Let’s welcome Red Jahncke. Red, Morning.
Red Jahncke: Hey. Morning. How are you, Gary?
Gary Byron: Hey. Good, Red. Of the, first 49 states levying the health care provider tax, otherwise known as the hospital tax, Connecticut always charged the highest rate. I’m not sure why. But this year, Governor Lamont proposed to kind of blast through the maximum rate. Again, this is despite that the House version of the reconciliation bill [enacted July 4th] bans any increase. The Senate version kind of scaled back the tax altogether. Lamont would seem to be taking the state into extremely shaky territory with it. A budget dependent on $375 million increase in taxing. It’s actually it’s actually taking the tax to a whopping $1.2 billion.
Red Jahncke: Yeah. This is a scam that’s been going on, nationwide, over the last decade in real force. Of course, Connecticut has indulged more than any other state. I remember two things from early in the Malloy administration. One was when the good governor introduced the hospital tax in 2011, and there were questions all around. You’re smiling. I can see you already. You were there.
Gary Byron: Oh, no, I wasn’t there 2011. I was there in 2015. But I remember this hospital tax bill in the Malloy administration.
Red Jahncke: They grilled Ben Barnes, Malloy’s OPM [Office of Policy and Management] manager, “Why are you taxing hospitals?” And he said, of course, “That’s where the money is.” He did his best Willie Sutton imitation. I love Ben Barnes. He was totally candid and straightforward about everything. Ben was totally accessible and transparent.
He admitted that the State of Connecticut was going over the threshold – there’s a practical maximum to these taxes, which is 6% of net hospital patient revenue. At the time, Ben was negotiating with, the Center for Medicare and Medicaid Services to go to 9%. And I said then “Are any other states going into this upper territory. And he said, no. So, there you have it. Connecticut has been operating and indulging in this tax to the maximum and beyond and beyond any of the other 48 states that employ them.
Gary Byron: I don’t know if you saw the front cover of Sunday’s Hartford Courant but a lot of them [hospitals] haven’t paid their taxes.
Red Jahncke: Yeah. I’m not conversant in the accounts in the state government offices in Hartford. So, I don’t know.
Gary Byron: All right, I’ll move along to public sector union abuses — not only alive and well, but more egregious than ever. Connecticut’s state employees are retiring with pension benefits higher than their last salary.
They’re taking an average of the last three years of their employment. And that includes overtime, by the way. People aren’t foolish; they’re going to take all the overtime that they can. The average salary will go up, like I said, just just working all the overtime in the last three years of your state employment and you’re going to elevate your retirement pension.
Red Jahncke: Yeah. This is a real outrage. Retiring with a beginning pension that’s well in excess of your last salary. That takes this into The Twilight Zone. I’ve been criticizing Ned for awarding state employees a 33% wage increase with six consecutive annual pay raises, right? Well, these employees are awarding themselves a 35% pay raise simply by retiring! They retire with a pension that’s 35% higher than their last salary. Why would you work any more years? Why work six more years to get the 33% when you can retire the next day and get a 35% wage increase in effect? It’s just mind boggling.
Gary Byron: You’re right. It’s more than mind boggling. It’s unsustainable.
Red Jahncke: Yeah. That word is so overused, and, in this instance is so appropriate. It’s spot on. Obviously can’t go on.
Going back to the hospital tax, the reconciliation bill is cutting that back. So, this increase you mentioned of $900 million to $1.2 billion that Ned wants will be forestalled by the House version of the bill; then, the Senate version, it’s cutting it back. So it’s it’s going to be cut back immediately from $1.2 billion to $900 million. Then, over a five year period, it will be cut from $900 to $500. The revenue impact here is half a billion dollars a year. This is not chump change.
When you used the word “shaky” on the intro, this state is has been on shaky ground. And now that ground is kind of falling out from underneath the state. The hospital tax is a game that’s largely over. Overtime spiking, how do you survive that as the employer?
Gary Byron: When is the next SEBAC up for negotiation?
Red Jahncke: Well, it’s in negotiation right now. The agreement has two sides. It has the wage side. And the wage side typically has a four year run. So, it’s on a quadrennial cycle. And then you have the benefit side. The benefit side is up in 2027, which is looming very close at this point. So, arguably both are under negotiation. And we don’t know because the governor does this all himself in secret with Daniel Livingston, the lawyer for SEBAC. And, then they present a fait accompli. And there’s a game that goes on in terms of approval. We don’t need to revisit that territory
But Ned is now flip flopping all over the place. There are 30 some odd bargaining units, individual labor bargaining units, under the flag of convenience called SEBAC, the State Employee Bargaining Alliance Coalition. The units are dropping out one by one and and taking Ned to arbitration, saying he’s not really negotiating in good faith. He’s dragging his feet. I’m sure you’ve read this.
And he’s saying, on the one hand, they’re all going to get raises. On the other hand, they’re saying that Ned’s offered a wage freeze. And, then “no, no, no, no. The state employees, I always give them an annual raise.” So, says Ned. And then another unit comes back and says, we were offered, a $2,000 bonus and no raises. It’s kind of comical, but, you know, state employee compensation is the largest item in the budget.
Gary Byron: Yeah. You’re absolutely right. And we’re going up about a third, like the pay raise for state employees. What is it, 30%?
Red Jahncke: Over the last six years, it’s been a 33% pay raise.
Gary Byron: 33 percent. Right. Okay, so a third. Yeah.
Red Jahncke: Yeah. Wow.
Gary Byron: Nice. Boy, I wish I got that.
Red Jahncke: Oh, yeah. Don’t we all. Because the, the national number is 23% in the private sector.
Gary Byron: Yeah. So, Lamont and Democrat legislators, they cut raises out of the just adopted budget for fiscal year 2026 because spending is barely within constitutional budget limits.
Lamont himself imposed a hiring freeze for the remainder of the [last] fiscal year to keep in balance through its end. Lamont threw in the towel and declared a fiscal emergency in order to legally allow spending to exceed the cap. Now, I was part of that fiscal guardrail, back in of what was it, 2017? And, you know, it kept us responsible and, we were able to finally start chipping away. It was effective. And, [now] Lamont caved to the outer fringe of his party. What do you make of that?
Red Jahncke: Ned has just been floating around along on federal Covid assistance and the stock market rocket ride. But now, the federal assistance is reversing. Uncle Sam is in deep financial territory. Our national debt is stratospheric. So, the federal reconciliation bill is pulling a lot of assistance to the states back. So, it’s a reversal. The tide came in with all of this Covid assistance. And now the tide is flowing out and withdrawing it all and more, as we just discussed on the hospital tax.
So they’re beginning to have to employ these budget gimmicks. You’re familiar with those, having been in the legislature. They go off budget. If you can’t honor the spending cap, you stay under it by going off budget. Off-budget spending is not subject to the spending cap.
Gary Byron: And the Volatility Cap.
Red Jahncke: The Volatility Cap was designed to send money to replenish the rainy day fund, and, then, any excess goes into the pensions, right? And the pensions are supposed to benefit from that. Ned’s been running around talking about pension progress. The problem is the pensions aren’t static. You got a huge credit card debt and you work it down over time. The equivalent in this analogy is credit card interest. Every time you try to work it down, there’s a new interest charge. It goes back up. What’s going on here is, every time they dump extra money into the pension fund, the pension liabilities spike up again because pensions are based on wages. And every time Ned gives state employees another wage hike, the estimated future pension liabilities go up again. Right? We’ve barely kept up. There’s been very little pension progress.
And this is also subject to kind of the tidal flows, ins and outs. Because as long as the stock market’s going up, we can say the pension assets are worth a pant load of money. With the stock market at record levels, pension fund assets are at record levels.
Gary Byron: Just about out of time. They’re my friend. But I thank you so much for your time and your expertise and knowledge that you write about. We’ll just have to get you on sooner. But, until then, I got to let you go.
Red Jahncke: Hey, thanks for my freedom.
Gary Byron: Thanks for being with us.
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.