Abuse of pension fund speaks for state government

Connecticut’s state government pension fund is acknowledged to be at least $16 billion short of what is necessary to fulfill its obligations to state employees. That underfunding is nearly equal to a year of all state government spending. According to the Yankee Institute for Public Policy, the official calculations are too optimistic and the underfunding is much greater, between $50 billion and $80 billion.

So what are Gov. Rell and the General Assembly doing about the problem? Making it worse. They’re patching the deficit in the expiring state budget by diverting to the general fund $100 million in pension fund contributions — without simultaneously reducing pension benefits and state government’s liabilities.

A modest reform has been offered by several candidates for the Republican nomination for governor as well as by the Yankee Institute — providing defined-contribution 401k retirement savings plans to new state employees instead of the expensive defined-benefit plans now offered. But despite state government’s insolvency and the long looting of the pension fund — which is what the underfunding really is — the Legislature has not even discussed reform.

The looting of the pension fund is another indication that the highest objective of state government is to keep compensating public employees generously. Since pension benefits are a matter of contract, when the pension fund fails to earn enough to pay benefits they will have to be paid from the general fund and will take precedence over discretionary spending — like support for the neediest.

State government has no contract with the neediest. While their assistance is nominally a primary purpose of government, the neediest are always expendable, and indeed even as the governor and Legislature raided the pension fund again the other day while failing to reduce pension benefits, they also cut spending on social services.

In Connecticut the needy are not even a constituency, just a rationale. Few of them vote or even have a clue what’s going on.

By contrast, government employees are far more than a constituency; they are a great political movement, so much so that their unions are thought to come close to controlling Democratic primary elections. In some places the unions even presume to dictate to the government, as they did the other day in Manchester, where two municipal employee unions sent a letter to the town manager, declaring that they were through making concessions and wouldn’t even talk about the issue anymore.

Why did the unions feel so put upon? Because in exchange for job security, most of their members gave up raises last year.

Meanwhile, Manchester’s taxpayers have been relied upon to make concessions almost every year for a long time, either through local property tax increases or state tax increases or reductions in public services. They will make concessions again this year.

Of course, public employee unions can’t be blamed for trying to get whatever they can. That’s their job — to make public employment as rewarding as possible, not to get value for taxpayers. People who are not employed by the government in Connecticut have to decide, through the political process, whether the government should be more rewarding for them.

School vice principals in Manchester earn as much as $140,000 per year, and while the salaries of most town employees have been frozen, the vice principals are still getting raises even as school services are being reduced. Some town government pensioners receive more than $118,000 annually. At $155,000 per year, Manchester’s school superintendent is paid more than the governor.

These circumstances are typical throughout the state as municipal government cannibalizes itself rather than reduce employee compensation and bring it in line with the public’s own falling income.

While townspeople, particularly those with children in the schools, lament “budget cuts,� town and school budgets actually continue to rise. The problem is that while the public’s income is falling, and, with it, tax receipts, public services are being liquidated so that staff compensation can be maintained and town employees exempted from the hard times everyone else has to live with.

The big political question facing Connecticut in this year’s state election is whether government ever again should be more than a pension and benefit society for its occupants. Having just diverted pension fund contributions to the general fund without also reducing benefits and liabilities, the governor and General Assembly have answered emphatically to the contrary.

Chris Powell is managing editor of the Journal Inquirer in Manchester.