McLaughlin contends Stefanowski can perform radical surgery

By Scott Benjamin

DARIEN – Former state Sen. Jamie McLaughlin says Connecticut’s economy is the equivalent of “a patient in need of acute care” and therefore he is “a big supporter” of Republican gubernatorial candidate Bob Stefanowski because he has “the financial acumen” to perform “radical surgery.”

The state faces a projected $4.4 billion shortfall for the two-year budget cycle that starts next July and the pensions for the state employees are only 29 percent funded.

Stefanowski, of Madison, a former longtime financial executive with General Electric and UBS, easily captured a five-way GOP primary last month. He has never held elective office.

“He’s the only one with the financial acumen, with broad based experience in financial services,” said McLaughlin, a longtime wealth management consultant who grew up in Woodbury and lived there and in Brookfield during his career as a state representative and then state senator from 1981 to 1991.

“In my lifetime, we’ve never had a governor with his background,” he added about Stefanowski, who has written two books on mergers and acquisitions.

“You’ve got two good people running for governor,” McLaughlin said in an interview.

“Ned Lamont is a good guy and a good businessman,” he said of the Democratic nominee from Greenwich. “But he isn’t going to be willing to make the radical changes in Connecticut’s structural economy.”

McLaughlin, who moved with his wife and son to Darien 19 years ago, said the major thrust from the next governor has to be revising the unfunded liabilities associated with the agreements with the state collective bargaining units.

“That would do more for the state economy than anything else,” he said. “It’s the only way out of this.”

McLaughlin, who was Senate chairman of the General Assembly’s Finance, Revenue and Bonding Committee in the mid-1980s, said the collective bargaining units “have made huge sacrifices on wages” over the recent years.

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 bargaining units have accepted “six hard wage freezes.”

“However, the wages are not the major problem,” McLaughlin said. “The unfunded liability on pensions and other entitlements is what is accelerating the problems. It’s crowding out the ability to do a lot of other things in the budget.”

Additionally, he said the contracts have to be revised in such areas as calculating overtime.

Dorman has said that a study by a consultant to the state Office of Policy & Management, the governor’s budget arm, has reported that the current contract would save the state $24 billion between 2017 and 2037 and the solution for the fiscal problems is for the state to find additional revenues.

“The state already is exceeding its capacity on revenues,” McLaughlin said.

“If you take nine municipalities in lower Fairfield County with the impact from being near New York City and the money coming from financial services – Greenwich, Stamford, Darien, New Canaan, Fairfield, Westport, Wilton, Weston and Redding – you have a large share of the state’s tax revenues,” he declared.

“Without that money, Connecticut’s economy would be like Rhode Island, Kentucky or Nevada,” said McLaughlin. “Sixty percent of the people on my street in Darien work in New York City.”

The next governor will potentially face large hurdles in revising the contracts with the state employee bargaining units, since the pension and health care benefits were extended last year through 2027 and there is a no layoff provision through June 2021.

McLaughlin said he respects the leaders of the state employee collective bargaining units, but believes the better path for the next governor would be to go directly to the rank and file members and seek support by explaining the potential downfall of a pension system that is only 29 percent funded.

The News-Times of Danbury recently reported that statewide the average among the 169 municipalities is a pension system that is 70 percent funded.

“Right now in Connecticut if you are 65 years old and a retired state employee you may not worry about whether the pension funds will still be there many years down the road,” McLaughlin said. “If you are 35 years old, you probably are going to be worried about that.”

He said he was surprised that Stefanowksi finished eight points ahead of his closest challenger – Danbury Mayor Mark Boughton – in the primary.

“Bob’s support is wide and deep,” said McLaughlin, who spent three seasons as the soccer coach at Lafayette College.

The Hartford Courant has reported that Stefanowski captured 116 of the 169 municipalities in Connecticut and was either first or second in 164 municipalities.

His calling card has been a plan to eventually eliminate the state income tax that was established in 1991 under former Gov. Lowell Weicker (ACP-Essex).

Stefanowksi unveiled that proposal last December during appearances with former University of Southern California economist Art Laffer, who helped write major tax reforms for former President Ronald Reagan and President Donald Trump.

However, McLaughlin said he agrees with the recent Hartford Courant editorial that called on Stefanowski to provide a detailed blueprint on how he would eliminate a tax that generates about 55 percent of Connecticut’s state revenue.

But McLaughlin said he believes Stefanowski’s appeal extends beyond his bumper sticker message that he’ll eliminate the income tax – a pledge that Gov. John Rowland (R-Middlebury) and independent gubernatorial hopeful Tom Scott made during the 1994 state election.

“I think it was more than just the tax cut,” he said. “I think voters thought that he understood their problems.”

“He’s communicated his expression of self,” McLaughlin added. “He is a product of a modest family. There is no pretense. He doesn’t look like a politician, and I think people like that.”

He said he’s a better candidate than Greenwich businessman Tom Foley, the GOP gubernatorial nominee who narrowly lost to Gov. Dannel Malloy (D-Stamford) in 2010 and 2014.

“This is a native son,” McLaughlin explained. “Tom Foley was too much an image of Wall Street and greenbacks.”

Stefanowski won the GOP nomination without participating in any of the five debates through last winter and early spring or even being nominated at the state convention in May.

He easily collected the required petition signatures to enter the primary and according to U.S. Senate candidate Matt Corey (R-Manchester) “outsmarted” the rest of the field by having a clear message on taxes that was amplified through a prolonged television advertising campaign.

Some news coverage has been critical that Stefanowski didn’t vote for 16 years before the 2017 municipal elections in Madison and that he has been less visible since the primary than Lamont.

CTNewsJunkie columnist Terry Cowgill wrote last month that, “Even by the low standards of politics, it’s a display of breathtaking arrogance” regarding Stefanowski’s lack of interest in voting and in government until he announced his candidacy last fall.

CT Hearst political reporter Ken Dixon has stated, “It’s so much easier to run a disembodied campaign for governor via the comfortable scripts of TV and video ads.”

However, McLaughlin said he sees qualities that would make Stefanowski a successful governor.

He said Stefanowksi has interpersonal relationship abilities which “are the core managerial skills that one learns at General Electric and many other large, multi-divisional corporations where line management is hand to hand to in the trenches observing, coaching, goading, exhorting and motivating a group of direct reports and their staff.”

Stefanowski has said that he was “rarely at the office” while working for General Electric. “I was with customers. I was on the shop floor. I was out meeting people and building relationships.”

McLaughlin also said that Stefanowski is “a prototype” of the model for a chief elected government official as described by noted presidential scholar Richard Neustadt, one of his professors in the master’s program at Harvard.

He said Neustadt believed that a successful chief elected government official “must be able to be the conductor of a moving symphony” as voter sentiments change.

On another topic, McLaughlin said he hopes a Stefanowski administration will embrace the report released last March by the state Commission on Fiscal Stability and Economic Competitiveness.

He called it an “excellent template” for improving an economy that is the only one in New England that hasn’t recaptured all of the jobs lost during the 2008 recession.

Among the recommendations are a reduction of the top income tax rate from 6.99 percent to 5.75 percent, an increase in the sales tax from 6.35 to 7.25 percent and a greater role by the General Assembly in negotiating contracts with the state employee collective bargaining units.

On another topic, McLaughlin, who served on the state Bond Commission for six years, said no governor since Weicker in the early 1990s has been willing to consistently hold the line on pork-barrel projects.

Additionally, he said Connecticut’s economy needs to be better positioned for advanced manufacturing and distribution of products by rail.

On a separate subject, McLaughlin, who has worked in financial services for a generation, said the Dodd-Frank financial reform of 2010, which was partly written by former U.S. Sen. Chris Dodd (D-East Haddam), has made operating on Wall Street “much more complicated” as a result of the compliance requirements.

He said most of the power from the legislation is held by federal regulators and not members of Congress.

U.S. Sen. John Kennedy (R-La.) complained in a Wall Street Journal column last year that Dodd-Frank has placed undue burdens on the community banks – 1,700 of which have disappeared since 2010.

McLaughlin said the number of banks has been declining for 35 years, noting that one of his Harvard professors said in 1987 that the 14,000 banks at that time would decline to 4,000 by 2000. McLaughlin said it actually declined to about 8,000 at the turn of the century.

American Banker has reported that figure had decreased by last year to about 5,800.

McLaughlin said, “It would be difficult to start a bank in Connecticut now, because of the state’s weak economy and the need to have the right capital and the right management team.”