Recent public announcements concerning Connecticut’s fiscal condition have come out in separate disjointed fashion. Taken together, they spell impending crisis.
It is no surprise that the state is facing an enormous deficit this year (and into the future), due, in part, to the sudden economic shutdown occasioned by the pandemic.
However, in larger part, the crisis has been long coming and widely anticipated. It is a function of the bill coming due for decades of paying state employees massively overgenerous, yet woefully underfunded, compensation. It is unlikely that Connecticut will have money both to continue state operations and to fund employee retirement benefits.
On the first of this month, Governor Lamont released his official deficit mitigation plan, as required after Comptroller Kevin Lembo made the obvious official, namely that the state faces a deficit of $1.8 billion in the current year’s budget of approximately $21 billion.
No one really knows where the state and the country are headed economically. The good news is that the state’s rainy day fund has grown to $3 billion since 2017. Lamont said he would use most of the fund to close the budget gap, leaving little for the next fiscal year and beyond.
Just days before, the governor announced his hiring of Boston Consulting Group to find $500 million in annual state savings, primarily from workforce attrition. The goal is to automate or eliminate many job functions, so that the expected retirement before mid-year 2022 of an estimated one-third of the state’s 49,000-person workforce will require the fewest possible replacements.
Of course, Lamont could have saved one-quarter of BCG's savings target by using his emergency powers to cancel the $135 million state employee pay raise last July 1st.
That would have caused employees little pain, as demonstrated by a recently released Yankee Institute study, which found that Connecticut’s state and municipal employees (excluding teachers) are paid about $20,000 per year more than their private sector counterparts. That translates into an aggregate annual premium of almost $1 billion for 49,000 state employees, assuming they and municipal employees enjoy equivalent pay.