Noted economics columnist calls for state employee compensation reform

By Scott Benjamin

RIDGEFIELD – Red Jahncke, a hedge fund manager and a leading columnist on Connecticut's economy, says “The number one challenge” for the state government is public employee compensation.

There is “a big spread between private sector and public sector compensation in the state,” he declared along with former state Sen. Toni Boucher (R-26) of Wilton as they spoke at a May 24 forum sponsored by the Ridgefield Republican Town Committee at the Ridgefield Library.

Jahncke of Greenwich said that the combined salaries, retirement and health care benefits are, according to studies, "30 to 45 percent" higher than for private sector positions in Connecticut.

"These are comparisons to your peers across the street and not a case of being compared to Mississippi.," said Jahncke, whose columns appear in outlets ranging from The Waterbury Republican, CT Hearst. The Manchester Journal Inquirer to The Wall Street Journal.

In a 2010 interview with the Housatonic Times, former Connecticut state House Speaker Fran Collins of Oxford, a Republican, said that years ago state employees received expensive fringe benefits because their salaries were lower than in comparable jobs in the private sector. He said that salaries had by 2010 had become more comparable and the costly benefits package needed to come "to a screeching halt."

State Sen. Ryan Fazio (R-36) of Greenwich has told Patch.com that the benefit packages for the state employees will not be affordable over the long run.

Remarked Jahncke, "It is unfair to taxpayers. It’s unfair to the private sector businesses, because you’re competing for the same talent. You can’t hire the people you need.”

However, former two-time Democratic gubernatorial nominee Bill Curry of Farmington disagreed.

"The best numbers I found on median wage for Connecticut's entire workforce was about $49,000 in 2021," he wrote in an e-mail message to Patch.com. "Average wage was close to $70,000, reflecting Connecticut's high number of very high earners. "

"The state employees' median wage in 2021 was about $41,000," added Curry, who served as Connecticut's state comptroller from 1991 to 1995.. "The average wage was about $58,000. The median number for the overall workforce is pretty solid. The median for state employees I'm less sure of, but it's in the ballpark. By these numbers, the median state employee wage is 17% lower than the median wage of the entire workforce. It stands to reason that comparing state workers to private sector workers, rather than to a composite of all workers, would produce an even greater disparity. All of these figures exclude benefits."

Boucher, who made brief bids for the Republican gubernatorial nomination in 2014 and 2018, said that for decades state employees have received generous health-care benefits. For example, she exclaimed that they have co-pays with health care providers that are far lower than that costs for private-sector employees.

State Sen. Stephen Harding (R-30) of Brookfield has told Patch.com that although the General Assembly approved in 2017 a less-expensive hybrid benefits package for new hires in the state work force, it should have taken a further step by enacting a direct contributions plan, which would have been even less costly.

Curry stated, "A fair question for anyone critical of state employee salaries then is how much less than $41,000 per year do you feel the average worker should earn in this high cost of living state? Or how much less than private sector workers should they earn?"

He added, "About a third of the state employee workforce is made up of minorities. Income inequality remains a major concern in Connecticut as in the country at large. No strategy of addressing it would begin with a campaign to drive down wages in that workforce."

In a phone interview with Patch.com, Curry said the best way to lower health care costs would be to establish a public option for state and municipal employees, which he proposed about 30 years ago when the was comptroller.

He said that legislation was approved at that time in the state Senate but failed by "one or two votes" in the state House.

Jahncke said that state employees are "blameless" regarding the state's failure to fully structurally fund their pensions in every year from 1939 through 2010 and the poor decisions made by the state treasurer's office in recent years on the investment of those pension funds.

Keith Phaneuf of CT Mirror reported earlier this year that the state employee pensions were only 46 percent funded. That is an improvement over the 29 percent figure cited in the 2018 report by the state Commission on Fiscal Stability and Economic Growth. However, former Brookfield Frist Selectman Steve Dunn, a Democrat, has told Patch.com that the typical benchmark in the public sector is 80 percent.

In an April interview with Patch.com state Comptroller Sean Scanlon of Guilford commented that the state has paid down $6 billion in the pension obligations over the last three years and is on track to pay another $3 billion this fiscal year.

“That is a bigger contribution than you made in [previous] 70 years in the pension fund,” he declared.

Scanlon said. “If we stay the course over the next 10 years [with the fiscal guardrails], we will take a significant chunk off that pension debt. The arc will be closer to the funding ratios that we all want to see.”

Jahncke also pointed to a recent CT Hearst column by two researchers in the Yale School of Management that there has been a meager yield over the last decade on the investments of state employee pension funds.

Jeffrey A. Sonnenfeld, a senior associate dean for leadership studies and Lester Crown professor of leadership Practice, and Steven Tian, the director of research and chief executive of the Leadership Institute at Yale, wrote that. "With $40 billion in assets — largely the pooled retirement savings of the state’s hardworking teachers, firefighters and public employees — if Connecticut’s investments had yielded just the median returns of all 50 states, the past five years, we would have had $5 billion more and be able to cut taxes by 50 percent instead of 0.5 percent. Connecticut would have reaped a whopping $27 billion more over the last decade — practically enough to fully fund Connecticut’s pension obligations while simultaneously dramatically reducing taxes."

Remarked Jahncke, "It set a record for poor pension performance."

Sonnenfeld has told Phaneuf of CT Mirror that he is confident that state Treasurer Erick Russell of New Haven, who just took office in January, will address the issues.

Phaneuf reported that Russell said, “I appreciate this report and its effect in elevating the critical ways that investment performance relates to the state’s overall fiscal health and the everyday lives of Connecticut taxpayers."

Former Gov. Dannel Malloy (D-Essex) and current Gov. Ned Lamont (D-Greenwich) have suggested that since, according to the 2018 report from the Commission on Fiscal Stability and Economic Competitiveness, the costs will explode, part of the pension costs for public school teachers should be paid by the municipalities. The state has fully funded them since 1939.

Commented Boucher, "it will kill everyone’s budget" if the municipalities take on some of those pension costs.

Curry stated, "I'm open to any suggestions, but I'd suggest that before the state asks cities and towns to pay their 'fair share' of pension costs, it might undertake to pay its fair share of the cost of education. Further burdening our already unjust property tax system is an idea I view with much skepticism. Either fix the property tax system or let the state take entire responsibility for teacher pensions, including responsibility for negotiating them."

Resources:
Red Jahncke and Toni Boucher talk, Ridgefield Republican Town Committee, Wednesday, May 24, 2023.
https://www.ctinsider.com/colu...

Bill Curry phone interview with Patch.com, Thursday, June 1, 2023.
Bill Curry e-mail statement to Patch.com, Friday, June 2, 2023.
https://patch.com/connecticut/...

https://ctmirror.org/2023/05/2...

https://patch.com/connecticut/...