Red Jahncke The Dems’ billion-dollar spending program
The tax-and-spend impulse is so deeply embedded in Democrats that it should be considered a genetic trait.
Take Democrat Gov. Ned Lamont. In the very beginning of his budget address Feb. 20, he warned of a $3.7 billion deficit, saying “The fiscal crisis before us is not just a short-term hole in the budget. We are digging that hole deeper by $400-$500 million annually due to fixed costs such as pensions.”
After that opening, he gave lip service to solving the fixed-costs problem, and, then, proposed a paid family and medical leave program, “funded via a payroll tax on employees of approximately 0.5 percent, which will raise an estimated $400 million annually,” in other words, a brand new program costing the same as those fixed costs — which will dig the hole even deeper.
The real issue and challenge concerning fixed costs is to address the fundamentals driving them ever higher. Lamont largely ignored the drivers. Instead, he proposed to rejigger the state’s payment schedule, reducing payments in the short-term and stretching them far out into the future. His scheme is no different from the credit card borrower who cannot restrain spending, and, instead, reduces his monthly payment to the absolute minimum, and, in doing so, incurs enormous interest costs over the long term.
The governor plans to extend the period to fully fund the teacher pension plan (TRS) from the current 13 years to 30 years. This lowers the state’s contribution to TRS by about $370 million in his proposed budget, but Lamont is simultaneously diverting $385 million into a dedicated “reserve fund” to back up TRS. The fund is designed as an alternate way to comply with covenants on outstanding state bonds that otherwise require the state to fully fund TRS before the bonds mature in 2032. So, the scheme is a wash in Lamont’s proposed budget.
Lamont plans to do the same with the state employee pension fund (SERS). His predecessor, Democrat Dan Malloy, extended the date by which 80 percent of SERS obligations must be fully funded. Lamont is doing the same for the remaining 20 percent. These moves are classic cases of kicking the can down the road.
Lamont did propose one pension reform for state employees, but it will go nowhere. Malloy extended the State Employees Bargaining Agent Coalition agreement to 2027, protecting most unionized state employees’ benefits for a decade. He also provided state employees a no-layoffs guarantee until 2021 and annual pay raises this year and next. So, state employees’ jobs, pay and benefits are untouchable for two more years. So, Labor needs nothing, and Labor negotiators don’t give something for nothing. If there are any “voluntary” concessions, beware of some hidden deal Lamont will have struck with union bosses.
The deficit is real. Lamont is simply reshuffling, not reducing, fixed costs. To be fair, Malloy left him little room to maneuver.
But, if he cannot reduce existing fixed costs, why would Lamont propose a whole new spending program?
Paid family and medical leave is actually two programs: family leave and medical leave. Paid family leave is straightforward: a baby is born and for so many weeks thereafter a parent or guardian goes on leave to care for it. The state pays all or part of the caregiver’s salary.
Paid family leave is uncomplicated, but not inexpensive. New York City is providing it to its 120,000 public school teachers starting this year. The city covers full salary for six weeks, at an estimated annual cost of $51 million, according to The New York Times. The Times reported that the city estimated that 4,000 teachers would avail themselves of the program each year, which works out to a per person cost of $12,750, which, itself, implies an average salary of $110,000.
Lamont and his fellow Democrats want to cover most of the state’s workforce of about 1.9 million workers. Using New York City’s estimates, and assuming an the average Connecticut salary of just $55,000, or half what city teachers make, then leave for six weeks would cost over $400 million - or $800 million for the 12 weeks Lamont & Co. want to offer.
Now add the other half, paid medical leave, and the whole program becomes a billion dollar plus spending program — funded by $400 million in new taxes? It is easy to see a brand new “fixed cost” emerging to drive ongoing deficits and yet more payroll tax increases in the future.
Don’t forget that paid leave is not the only burden Lamont & Co. want to thrust upon citizens. They plan to install tolls on Connecticut highways to raise about $800 million of toll revenue annually, at least 50 percent from state drivers.
Paid leave is folly for a state in crisis, and yet another blow for citizens, especially when coupled with tolls and an expanded list of items subject to sales tax.
Connecticut Republicans should oppose the Democrats’ paid leave plan. It is not that Republicans should oppose paid leave. After all, the nation’s top Republican, President Donald Trump, endorsed the idea. Actually, this provides state Republicans an ideal position to take: endorse the president’s position and support paid leave at the federal level, but oppose it at the state level.
Red Jahncke is president of Townsend Group Intl, LLC, a Greenwich-based consulting firm.