The Red Line

What if Connecticut’s All-Democrat Congressional delegation (pictured above) had had their way a year ago? The Magnificent Seven all supported President Biden’s Build Back Better proposal, a constellation of new federal spending initiatives that would have cost anywhere from $2 trillion to $6 trillion.

At the time, the national debt had already skyrocketed by almost $7 trillion largely to fund spending over the course of the shutdown and the pandemic.

Imagine inflation today if that massive boondoggle had been enacted.

If ever there were a reason to “nationalize” an election and for voters to “throw out the bums” for misdeeds in Washington, promoting such wildly irresponsible national spending should be the textbook example.

Voters in Connecticut should throw out Senator Blumenthal and Representatives Joe Courtney, Rosa DeLauro, Johanna Hayes, Jim Himes and John Larson for fiscal and financial malpractice.

It is a sad day in America when we cannot agree to disagree. It is sadder when failure in that regard is overtaken by an effort to smear those with whom we disagree.

This week saw such a sadder day, with the release, and widespread media magnification, of a report by a far-left group attacking by name hundreds of Republican officeholders nationwide charging them literally with guilt by association.

The headline in one Connecticut media outlet sounded the alarm: “Report finds 16 Connecticut legislators have joined ‘far-right’ Facebook groups.” Similar headlines appeared across the country.

The Connecticut General Assembly session has now concluded with the adoption of a revised budget for the biennium of fiscal years 2022 and 2023.

Happily, Democrats conceded to half of the GOP’s recently proposed $1.2 billion tax cut plan.

Yet, Governor Lamont rejected a major element of the GOP plan: a proposal to use off-budget American Rescue Plan (ARP) money to repay hundreds of millions of still-outstanding federal loans received by Connecticut over the last two years to fund unemployment insurance benefits.

Apparently, that proposal has been squashed, with Lamont agreeing to repay only $40 million.

Why is a loan repayment proposal part of a tax-cut plan? Because otherwise these loans must be repaid with hefty tax increases on employers in the state.

Gov. Lamont’s tentative agreement with Connecticut state labor unions (the “State Employees Bargaining Alliance Coalition,” or SEBAC) compounds distortions in the natural process of renewal in the state workforce introduced by his predecessor. To prevent a retirement wave over the next three months, Lamont is offering huge wage raises and bonuses to induce employees to stay on the job.

Ironically, in battling a retirement surge created by his predecessor’s meddling, Lamont’s own meddling would create a much bigger and costlier wave in less than two and a half years.

Connecticut Governor Lamont has proposed to award state employees significant wage increases and bonuses over three years. But before moving ahead, policymakers should consider whether public employee pay increases are warranted.

A recent study authored by one of us finds that the average Connecticut state employee already receives total pay and benefits roughly one-third higher than is received by comparable private sector workers in Connecticut. This 33% premium is the fifth highest compensation premium out of the 50 U.S. states. Lamont’s proposal would likely widen that gap.

According to state employee union documents, Lamont is proposing to award all unionized state employees three annual base salary increases of 2.5% and, for about two-thirds of employees, annual “step increases” of 2.0%. The wage and step increases are retroactive to July 1, 2021. On top of these increases, every employee will receive bonuses of $2,500 this coming May and $1,000 in July. The bonuses are pensionable.

The new study of compensation for state government employees, authored by Andrew Biggs, examines wages and benefits of state government employees in the 50 states, in each state comparing their compensation to that of private sector workers with similar levels of education, experience and other characteristics.

The use of the same methodology in all 50 states establishes a level playing field and produces genuine comparative results among the states. Moreover, comparing state and private workers in the same state eliminates the need for any cost-of-living adjustments.

State employees may not seem overpaid. But salaries are only part of the story.

The study also finds that fringe benefits are dramatically higher in state government than in the private sector. State employees in Connecticut accrue pension benefits that are roughly six times more generous than the employer contribution to 401(k) plans which predominate in the private sector.

Connecticut’s retiree health program for state employees is by far the most generous in the country. According to state accounting disclosures, the future benefits accruing to current Connecticut state employees are worth an extra $16,000 for each year of work. Retiree health coverage is nearly extinct for private sector workers.

Overall, total fringe benefits for Connecticut state government employees are over three times higher than for similar private sector workers, which more than makes up for slightly lower salaries in state government.

States have done many things with the federal aid that state governments received under last year’s $1.9 trillion American Rescue Plan (ARP). One thing they are expressly prohibited from doing is pouring that money into pensions for well-paid public employees. Connecticut is doing it anyway.

In February, Gov. Ned Lamont’s released his $48 billion two-year budget proposal. It funnels $2.9 billion in special deposits into the state employee and teacher pension funds. This is an amount equal to all the ARP aid the state received. These special deposits are over and above Connecticut’s regularly scheduled $7.2 billion in state contributions to the two retirement systems.

This month, Lamont has proposed to pay state workers a $3,500 bonus payment, or 4.5% of the average employee’s wage of $77,000. In addition, he intends to pay 2.5% annual wage increases over three years while also paying “step increases,” which average about 2% annually.