With limited choices on how to solve the state's billion-dollar budget deficits, legislators must ask state employee unions for salary and/or benefit concessions, rather than depend solely on budget cuts and tax increases to make ends meet.
While all three options will likely harm the state's economy in the short term, preventing higher taxes on businesses and individuals must be the No. 1 priority if lawmakers want to avoid long-term damage to the state's job-growth prospects.
With one of the slowest growing economies in the country, Connecticut has already endured two of the largest tax hikes in state history over the last six years, budget-balancing moves that undoubtedly sapped business investment and hiring in the state.
Coming off a year in which Connecticut added a paltry 1,400 jobs (from January thru November) and saw its population drop for a third year in a row, increasing the cost of living and doing business in the state will simply continue those negative trends.
As the legislative session officially kicks off, lawmakers must tackle projected deficits of $1.5 billion and $1.6 billion over the next two fiscal years, shortfalls that represent about 8 percent of the General Fund. Surging retirement benefit costs are a major factor contributing to the continued deficits, along with weak growth in tax receipts.
It's likely many oxen will be gored in the budget-making process, including municipal aid, social services and higher education, but getting concessions from state employee unions — on salaries, health care and/or retirement benefits — must be a key part of the mix (state employee pay and benefits make up nearly 35 percent of the state's $20 billion annual budget).
Gov. Dannel P. Malloy deserves some credit for recently striking a deal with state employee unions that restructures annual pension costs. The deal prevents the state's annual pension contribution from going above $2 billion over the next decade by shifting $13.8 billion in expenses — which were supposed to be paid off by 2032 — onto the next generation.
But the deal didn't change benefit levels for current or future retirees or require workers to contribute more for their own benefits. The governor must get more out of the deal for Connecticut taxpayers.
State employees have come to the bargaining table before. In 2011, unions agreed to a two-year wage freeze and other concessions that saved about $650 million, but it hasn't been enough to solve the state's budget crisis.
Unfortunately, state employees' current pension and health insurance deal runs through 2022, which was negotiated as part of the 2011 concessions, giving unions much of the leverage for now. But Malloy and his budget chief Ben Barnes must insist on re-opening the pact for negotiation. State workers have some of the sweetest benefits in the state, requiring no out-of-pocket costs for many medical services, including inpatient hospital stays, and $15 co-pays for visits to physician offices, according to the Connecticut Mirror.
Meantime, the deductible ($350 for individuals and $1,400 max for a family) can be waived if plan participants enroll in a wellness program, according to the Connecticut Mirror.
Compare those benefits to the private sector, where co-pays, deductibles and other expenses have been steadily increasing for years, and it's easy to see how state employees are getting a plush deal on the backs of taxpayers.
Unions have argued that lawmakers should raise taxes on the wealthy and eliminate business incentives to help close the deficit. That formula, however, has already proven to be a recipe for failure, producing a stagnant state economy that encourages more residents to flee to warmer, lower-cost states.
State employees are supposed to serve taxpayers, not hold them hostage in a budget crisis. Let's hope they do right by the state and come to the bargaining table in good faith for honest and fair negotiations.