Joel imageBy Joel Schiavone

Connecticut State expenses for employee benefits current and past have gone from 10% of the budget to 30% over the past few years. Through a variety of accounting tricks, borrowing monies, and simply ignoring pension obligations they have submitted a break even State budget for the past eight years, as required by law, knowing full well that they would lead to large illegal deficits.

For more than eighty years every Connecticut Governor has failed to do this by not paying their full share, and in some cases no share, of these benefits and passing along these costs to future generations. They finally have decided that they can’t keep going with their illegal deficit budgets and are now trying to deal with $75 billion in past service liabilities.

Unbeknownst to most people various politicians in Hartford are searching for a way to pay the exorbitant pensions. I don’t think it has ever occurred to them that they can’t pay them because they have no more money and no more access to money. But let’s go through their high level antics and see where they are.

Here is a list of the items they have discarded so far.

  1. Borrow more money. Not possible as they had to agree not to borrow more money or change the terms of their most recent loan. Obviously the lenders realized that the State was in desperate shape.
  1. Offer the pensionaires a buy-out. A fine idea but there’s not enough money to pay the bills never mind the pensionaires.
  1. Combine City and State Departments so that savings can be achieved.

This is a forlorn suggestion that dates back from the demise of the county system of the 1950’s. With the current union contracts they can’t do this. If they ever do get around to it, they’ll soon find out thatthere are no savings. What we don’t need is another bureaucracy.

  1. The millennials will move into a renewed Hartford and solve everybody’s problems. Nice idea but New Haven has a thirty year head start and will dominate the millennial market for a long time to come.
  1. Obviously we are only talking about State indebtedness. However the fiscal problems of the municipalities mirror those of the State. Recently Hartford asked for a $50 million dollar bail-out and the legislature gave them $500 million. This probably will still not solve their problems. Hartford as well as the other municipalities are designed to lose $400 - 500 million a year forever.
  1. Waiting in the wings are all the other urban areas in the State. One could say the good news is that they don’t have $500 million so paying this will never be a problem for the State.

What they have agreed upon:

  1. All agree that they cannot impose more taxes at any level of government. They also agree that the fiscal problem is the sole concern of the State. Individual City governments have no capacity to solve their own problems let alone the State’s.
  2. The only solution they have agreed on is to reduce costs. So far they

have no suggestions. Unless of course you consider their suggestion to sell State a way to raise money. Only someone who knows nothing about real estate could suggest this. The last recession some years ago where State office buildings were sold, they went to Hartford real estate developers who purchased them with sale/lease back deals, in other words purchased them fully leased back to the State and with no real downside risk to the real estate developer and no cost savings to the State.

Anybody on the outside would have no trouble identifying billions of dollars

in costs primarily in exorbitant employee pensions but this committee can’t seem to find any way to reduce costs except for selling office buildings Soooo… they are refusing to talk about bankruptcy which is being described as not effective. No recognition of the lessons we should have learned from Detroit, Rhode Island, and California where appointed governance bodies had no trouble finding billions of dollars in excess personnel benefits. Do we really think we can eliminate $75 billion in debt through negotiation with the unions or selling some buildings or is bankruptcy the only option?

Stay tuned. Watch all these alternative ideas flopping on the deck of our rescue boats. None of them will survive. Brace yourself for major surgery either through bankruptcy or by outside receivers.