Extreme Times Call for Extreme Measures

December 14, 2017

Last week, Connecticut residents received two discouraging pieces of information. First, the state lost $2.6 billion in revenue during 2015 as high-earning individuals left Connecticut. Second, the Special Transportation Fund used to maintain and improve the state’s aging highways and rail lines is going broke.

The two are not entirely unrelated.

Residents are using our state’s roads, railways, and airports to flee before Connecticut collapses into an enormous infrastructure and economic sinkhole.

We saw this coming.

For years, the legislature siphoned money from the Special Transportation Fund to fill potholes in the General Fund. Without funding to repair and improve the state’s infrastructure, decay was inevitable.

Neglecting transportation infrastructure negatively impacts economic development. Successful businesses must move people and products efficiently.

With money in the Special Transportation Fund dwindling and General Fund deficits exploding, the administration looked for other revenue sources.

Since 2011, Governor Malloy gave Connecticut the two largest tax increases in the state’s history. Instead of resolving the state’s budget problems, each fiscal year, except 2013, ended in deficit.

How could higher taxes equal lower revenue? The U.S. Census Bureau and Internal Revenue Service answer this.

Earlier this year, the Census Bureau released information that Connecticut loses about 500 residents each week. People moving into the state don’t make up for the loss of 26,000 people each year.

Last week, the IRS noted that residents earning $200,000 a year and more were the largest group leaving. Between 2015 and 2016, the state lost 2,050 high-income earners with a total adjusted gross income of $2.5 billion. During this same period, 84,000 people left Connecticut taking $6.6 billion in income with them.

No wonder we have budget deficit after budget deficit.

High taxes are affecting every stage of the economic ladder. On a recent trip to Boston, I spoke to a hotel operator who was a former Waterbury resident. This is someone of modest means who told me he could not afford to stay in Connecticut. He needed a car for work, but couldn’t afford our high property taxes.

High taxes impact state businesses, their ability to hire employees, and their ability to stay in Connecticut. In September and October, our state lost 8,600 jobs.

Aetna and GE left the state and many more businesses will follow, further shrinking the pool of taxable income.

One area is not shrinking, but should: state employee pay and benefits.

During the summer, Democrats approved a generous contract with state employees. Their pay and benefits account for 30 percent of the state budget.

Yankee Institute calculated the average Connecticut state employee salary at $70,970, plus benefits. Benefits, either received or accrued toward retirement, are worth between $54,561 and $75,641. Benefits account for 56 percent of the state’s payroll for typical employees and jumps to 83 percent for hazardous duty employees.

Massachusetts state employees earn an average of $10,000 less than Connecticut. In New York, it’s $5,000.

Combine total salary and benefits and the average Connecticut state employee receives between $125,531 and $146,611. A comparable private sector employee earns about $96,177. State employee pay and benefits average 25 percent to 46 percent higher than private sector employees.

This is unsustainable! Connecticut cannot afford to keep paying such generous benefits and salaries.

We need to have the guts to do something extreme. Otherwise, the only taxpayers will be state employees paying taxes to pay their own salaries.

We can fix this. By prioritizing bonding and spending, we can renew the Special Transportation Fund and repair our decaying infrastructure. No more stadiums or unwanted beach projects.

We can go back to state employees and end longevity payments. We can remove overtime from pension calculations. We can move from pensions to 401K-type plans. Employees can pay more for their health care.

The alternative is higher taxes. That scenario only results in more Connecticut residents leaving while the state crumbles behind them.

We have shown that it is possible to get everybody back to the table to work out these issues. It’s time to do that again with the understanding that extreme times call for extreme measures. It will take all of us, but I know it can be done.