Boughton contends state pension debt bomb will likely go to court

By Scott Benjamin

DANBURY -- Mark Boughton – who has been a contender for the Republican gubernatorial nomination in each of the last three election cycles – says the debt bomb awaiting the next governor is so massive that pensions may have to go unfunded to ensure that essential services can be maintained.

However, departing Gov. Dannel Malloy (D-Stamford) has trimmed the full-time state work force by 13.1 percent and the state’s prison population is the lowest it’s been since 1994.

Isn’t the state on the track toward being more cost-efficient?

“The most important opportunity was to reorganize the pension and benefit provisions in 2017,” said Boughton. “He didn’t do that.”

Yes, critics say there should not have been a four-year no layoff clause that extends through June 2021, and the agreement for the fringe benefits, which had been set to expire in 2022, has been extended to 2027.

But, Larry Dorman, - the public affairs coordinator for the American Federation of State, County and Municipal Employees Council 4, which represents about 15,000 state workers, has said the package approved in 2017 will – according to a consultant hired by the state Office of Policy & Management (OPM) – save taxpayers $24 billion between 2017 and 2037 and the collective bargaining units have accepted six hard wage freezes over the recent years.

He contends that no “insurance executive or hedge fund trader” has made those sacrifices.

“I understand what he is saying,” said Boughton, a Republican, who has been mayor of Danbury since 2001.

“But what he actually is saying is that the barn is on fire and we saved half the barn,” he declared.

The state Commission on Fiscal Stability and Economic Competitiveness has reported that the state employee pensions are only 29 percent funded.

“One former state employee is making over $300,000 a year on a pension,” said Boughton, who won the GOP convention nomination last May but finished a distant second to former financial officer Bob Stefanowski of Madison in the primary. Stefanowski faces Democrat Ned Lamont of Greenwich in the November 6 election.

“Some future governor is going to say, ‘I’m not going to fund the pensions because I have to keep state troopers on the road,’ “ Boughton said in an interview.

“The most important and the most difficult thing that has to be done is bring the benefits more in line with what the private sector has,” he said.

“I work cooperatively with our unions [in Danbury],” said Boughton. “But the state union leaders’ job is to get the best contract for their workers, not to represent the taxpayers.”

“I’ve spoken with hundreds of state employees that recognize that there is a problem,” he said.

However, with a no-layoff clause that extends two and a half years into the next governor’s term and an agreement on the pensions that extends nearly a decade, do you think the collective bargaining units would be willing to renegotiate?

“I don’t think they’re going to come to the table,” said Boughton.

CT News Junkie has reported there is a projected $4.4 billion budget gap for the two-year budget cycle that starts next July.

“I think whoever wins the governor’s race – either of them – if they look at the balance sheet and what has to be done – they are going to end up in court,” Boughton declared.

“That is an incredibly difficult path to follow,” the mayor said. “The intense pressure. The next governor will face that. You might not get another term. But it is the medicine that the state needs.”

“I don’t think the public understands how bad things will be in the future if radical steps aren’t taken,” he added. “I think it is best to tackle this now and do what is best for everyone.”

He said he agrees with the recommendation by the state Commission on Fiscal Stability and Economic Competitiveness in which the General Assembly would have more input into contract negotiations with the state employee collective bargaining units.

“We have to hold legislators accountable for contracts that aren’t sustainable,” he said. “They just can’t shrug and say that it’s a fixed cost.”

Over decades, much of the negotiating has been done by the governor’s office through its budget arm – OPM.

CT Hearst business columnist Dan Haar has noted that economist Donald Klepper-Smith of Datacore Partners in New Haven and a chief advisor to former Gov. M. Jodi Rell (R-Brookfield) has said Connecticut has only recaptured about 90 percent of the jobs lost from the 2008 recession and Massachusetts – with the booming Route 128 corridor - has recovered 350 percent of them.

The economic recovery under Republican President Donald Trump and former Democratic President Barack Obama has been slow, but if it continues sometime next year the sustained economic expansion will surpass the longest in the 242-year history of the United States – the surge under former Republican President George H.W. Bush and former Democratic President Bill Clinton from 1991 to 2001.

But Klepper-Smith has said the nation will probably be in a recession before Connecticut recaptures all the jobs lost from the Great Recession.

Greenwich hedge fund manager Ray Dalio, who has been credited with forecasting the 2008 financial crisis, recently told MarketWatch.com that the United States is two years away from a recession that will largely result from debt, a gap in wealth and opportunity and central bank policies that won’t be able to properly correct the downturn.

Boughton said he shares the concerns expressed by Dalio, who owns Bridgewater Associates in Westport, the largest hedge fund in the world.

“I worry about the credit problem that is happening now,” the mayor said. “Some lenders have gone back to their habits of giving loans that people aren’t really qualified for.”

In a 2013 talk at Western Connecticut State University in Danbury Boughton said that at the height of the subprime mortgage crisis “you could get $400,000 for your dream house, no job, no money, no credit, no anything – just sign a paper.”

Boughton added that the college student loan debt problem “is deep.”

“Those are two bubbles that are problematical, and as we saw during the Great Recession everyone is interconnected,” said the mayor, who was the Republican candidate for lieutenant governor in 2010 and then placed second in the GOP convention balloting for the gubernatorial nomination in 2014.

The Greater Danbury Chamber of Commerce has said that Danbury ranks first in Connecticut in sales tax revenue – largely the result of the Danbury Fair Mall -and first, per capita in Connecticut in the number of restaurants.

However, Boughton said over the recent years there have been more families in poverty living in the Hat City.

“More than 50 percent of our students get reduced lunch,” he explained.

Boughton attributed part of the condition to “wages for the middle class that haven’t returned to pre-’07 increases” after the subprime mortgage crisis and recession.

The mayor said the national economy already is struggling to address the impact of artificial intelligence.

“There are only six waiters now at the restaurant when there used to be nine,” he explained . “Things have become more automated.”

“You can see a scenario where machines are making the choices,” said Boughton.

He said since the August 14 primary he has met “extensively” with Stefanowski, who has never run for public office before, and said that he’s impressed with his “intelligence.”

“He has a curious mind,” said Boughton. “I have no doubt that he can do the job.”

Stefanowski held major positions with General Electric, UBS and a payday lending service before launching his campaign for governor.

Regarding the nominating process, Boughton said he supports continuing to have the conventions, but acknowledged that he and many of the other candidates devoted considerable time primarily talking to 1.100 delegates.

Stefanowski largely eschewed that approach and started airing television commercials early this year and built a base of contacts he had made from people who had signed his petition to be on the primary ballot.

Boughton recommended that the conventions be held in January instead of May and be largely devoted to organizational activities and workshops.

He said candidates could then qualify for a primary through collecting signatures or raising a certain threshold of money or some combination of both options.

Boughton said the primaries should be held in May so there is a larger turnout and the winners have more time to prepare for the general election. The primaries have been held in August for 14 years and before that were held in September.

The mayor said he voted against versions of the Citizens Election Program that were offered during his three years as a state representative in the late 1990s and early 2000s. However, he said the program is worth keeping with revisions.

Rell signed the legislation in 2005.

“I was never comfortable buying bumper stickers at taxpayers’ expense,” Boughton said of the grants that qualifying candidates receive.

However, he said if candidates of governor and lieutenant governor were teamed together before the primary money could be saved by giving just one sum to the ticket. The candidates for those offices are not part of ticket until after the primary under the current system.

Right now both candidates for governor and lieutenant governor can qualify for a grant if they raise enough money in contributions of $100 or less.

“By making some changes you could save significant dollars and keep people competitive,” Boughton said.

He also suggested that the amount for qualifying contributions be increased from $100. Some candidates have complained that it takes considerable effort to raise $250,000 from small donations.

Stefanowski, Lamont and independent gubernatorial candidate Oz Griebel of Hartford each bypassed using the Citizens Election Program.