EDITORIAL: Gov. Malloy’s budget unravels [New Haven Register]
February 1, 2012New Haven Register Editorial Published: Tuesday, January 31, 2012
As Gov. Dannel P. Malloy’s budget unravels, he is proposing more spending. Unless the economy improves drastically, taxpayers should be prepared for another raid on their wallets in the next two-year budget.
The legislature’s Office of Fiscal Analysis puts the shortfall between projected revenue and spending in this year’s budget at almost $145 million. It was supposed to have a surplus of $88 million.
The OFA’s projection doesn’t include the $79 million in spending cuts that have been announced by Malloy. However, an examination of those cuts suggests that more than half of these savings are being counted twice. About $42 million of the cuts announced by Malloy are already included as savings in the budget passed in June.
What happened to the governor’s pledge of a budget without fiscal gimmicks?
In addition to the growing budget gap, the governor has reacted to a major bond credit rating agency, Moody’s, lowering the state’s rating a notch because of its high debt and unfunded pension and health care liabilities.
The state has only $9.1 billion in assets to cover its $21.1 billion in pension obligations to state employees. Because the state had skipped or skimped on actuarially required annual pension fund contributions, it faces a colossal payment of $4.5 billion in 2032 to fully fund its pension obligations.
Malloy has proposed smoothing out the payment amounts by contributing an additional $125 million annually starting next year. The proposal is a first step, but it should set off alarm bells among those concerned by Malloy’s desire to spend more state money. He wants the increased pension spending to be exempt from the state’s spending cap.
Further, his deal with state employee labor unions locked in abuses that drive up pension costs.
The governor should go back to the unions and ask for a switch from defined benefit to defined contribution retirement plans. He should insist that neither overtime pay nor longevity bonuses be included in pension calculations. There are 376 retired state workers collecting pensions of more than $100,000 a year thanks to the state’s generous pension policies.
Malloy had advocated for some of these changes last year in labor negotiations. Instead, the state is locked into its pension plan for workers hired before July 2011 until 2022. The state will spend more and save less.