Budget reporter declares Lamont's proposed plan breaks the mold

By Scott Benjamin

WILTON – CT Mirror budget reporter Keith Phaneuf says he’s “never seen” a fiscal blueprint such as the one proposed by Gov. Ned Lamont (D-Greenwich), which tries to balance spending and “end the cycle of deficits” without increasing the income tax “or touching the rainy day fund,” which is headed toward $2.1 billion.

“There is a lot of pain in this budget,” said Phaneuf in reference to Lamont’s proposed $43.2 billion two-year package for the cycle that starts July 1.

Among other things, the governor is trying to reduce state bond appropriations by $600 million a year.

Lamont is also seeking to have fewer exemptions to the state sales tax, reduce municipal aid, and, where possible, regionalize school districts.

“Most state agencies, on paper, are being kept flat,” Phaneuf said. “If wages increase, then other costs go down.”

Phaneuf wrote a series for the online niche journalism web site more than a year ago on Connecticut’s legacy of debt. He told more than 100 people at a League of Women Voters forum in the Wilton Library on Thursday night, April 4 that the highest hurdle is not “generous” state employee benefits, but a pension system that wasn’t adequately funded for generations.

“The biggest problems, if you go back in time, is that we didn’t save responsibly and now 85 percent of the costs on state employee fringe benefits are related to the sins of the past,” he declared. “The other states are now laughing at us.”

Phaneuf said in every year from 1939 to 2010, “Connecticut structurally short-changed pension funds. Connecticut forfeited billions of dollars in money.”

The reporter said that in every year of the 1980s the state “short changed” the pension fund for local public school teachers, which it took control of in 1939.

He said 20 years ago the fixed costs for pensions and health care benefits for state employees and the pension system for the public school teachers took up 10 percent of the state budget. He said those costs are at 30 percent and are “crowding out” spending for other services.

Last year the state Commission on Fiscal Stability and Economic Competitiveness reported that the state employee pensions were only 29 percent funded. The New York Times has reported that eight years ago, Rhode Island considered it a crisis when its pensions were only 48 percent funded.

State Comptroller Kevin Lembo (D-Guilford) has praised former Gov. Dannel Malloy (D-Essex), who served from 2011 until early this year, for putting adequate funds in the budget to pay for the pensions of the state employees and the municipal school teachers.

Lamont has indicated he wants to continue that practice.

Phaneuf said it is very unlikely that the state could invoke provisions of the 11^th Amendment of the U.S. Constitution to “protect the state against accumulated debt” and force the state employee collective bargaining units back to the bargaining table, since a recent report indicated that Connecticut ranks in the nation in per capita personal income.

David Stemerman of Greenwich, a financial advisor and former hedge fund manager who placed third in last year’s Republican gubernatorial primary, has predicted that Connecticut, Illinois and New Jersey, which also face considerable pension debt, will likely seek to invoke the 11^th Amendment.

“With the revenue streams that we now have there is more money than in 2011 [when the state faced a projected $3.7 billion budget deficit] or 2008 [during the national financial services crisis],” said Phaneuf said of the tax increases enacted by Malloy in 2011 and 2017.

However, he noted that the revenue streams from the wealthy changed in 1991 when former Gov. Lowell Weicker of Essex, a member of A Connecticut Party, signed the income tax legislation. Phaneuf said to get support from some legislators in the wealthy Fairfield County Gold Coast the taxes on dividends and capital gains were eliminated. The wealthy now just pay from the top income bracket of 7 percent. The Fiscal Stability Commission last year recommended that the rate be dropped to 5.75 percent.

CT Hearst business columnist Dan Haar has stated that Malloy trimmed the full-time state work force by 13.1 percent. He also reduced the state’s prison population to its lowest level since 1994.

Yet, there is a projected $1.4 billion budget deficit for the fiscal year that starts July 1 and shortfalls forecast for succeeding years.

Connecticut is the only New England state that has not recaptured all of the jobs lost from the 2008 recession, according to Donald Klepper-Smith, who chaired former Gov. M. Jodi Rell’s (R-Brookfield) economic team.

The rainy day fund has grown almost to the point of 10 percent of the budget. Lembo has recommended that it be maintained at 15 percent. Most Connecticut municipalities that hold AAA bonding ratings have a fund balance above 10 percent.

Phaneuf, who had covered the State Capitol for many years at the Manchester Journal Inquirer, told the audience that CT Mirror, which was launched as an “experiment” nine years ago, has emerged as a major media source.

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