Powell: State pension fund's gains do little for Connecticut's private sector

By CHRIS POWELL

Connecticut state government's pension fund increased in value by 15% during the fiscal year just ended, state Treasurer Erick Russell announced the other day, and its unfunded liabilities, while still in the billions of dollars, are being reduced steadily, even though its total liability still increases with the generous raises the Democratic state administration keeps bestowing on unionized state employees, the party's army.

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Altogether this is progress for which Governor Lamont, the General Assembly, and the treasurer can take credit, especially since many Democratic legislators are starting to resent it and want to put less money into the pension fund so more can be spent on social programs.

But not everything here is worth celebrating.

For while the improving solvency of the pension fund is a mark of better public administration, the fund itself provides no benefit to the public. It's a benefit only to state government employees and retirees -- and to the politicians who rely on them at election time.

State government began offering pensions to its employees decades ago in large part to compensate them for salaries that were low compared to those in the private sector. Today's state employees are substantially better compensated than private-sector employees when wages, insurance benefits, paid time off, pensions, and job security are calculated.

Few people outside government in Connecticut would assign state employee pensions the priority they get. Most people would give a higher ranking to things like transportation, education, and public health. But there have been no improvements in those areas that can match the improvement in the state pension fund's solvency. With Connecticut's agenda the contentment of government's own employees comes first.

Most private-sector employers in the state manage to assemble adequate workforces by offering ordinary 401-k and individual retirement account pensions -- "defined contribution" plans in which employees rely on their own investment skill or that of advisers for the benefits they receive. By contrast, state government's pensions are mostly "defined benefit" plans carrying a state guarantee of benefits.

Fairness would put everyone in the same class, but politics in Connecticut requires a privileged class. State employees have earned their privilege not with the special value of their work, though some is indeed special, but with their political activism as a special interest. The public is taxed to pay for this privileged class -- taxed to pay for a benefit it will never itself receive -- because, as the journalist James Reston wrote, the first rule of politics is the indifference of the majority. Most people pay little attention to government and so pay more for it.

Another reason for not celebrating too much about the improvement the pension fund is that it results largely from inflation. With the federal government creating money like crazy through deficit spending, the value of most assets has increased far faster than private-sector wages have increased.

While it is not widely understood, inflation is government policy, not some force of nature -- policy that profits the owners of property, like real estate, stocks, and businesses, and penalizes mere wage earners and especially young people trying to establish themselves.

Last month Connecticut's Hearst newspapers reported that "starter" homes in the state -- homes in the bottom third of prices -- now have a median price of $300,000 and that their prices have risen three times more than median incomes in the last decade. Homeowners and landlords love the unearned capital gains but they come at a big cost to others.

The new annual "ALICE" report from Connecticut's United Way organization -- a report about people who are "asset-limited, income-constrained, yet employed" -- says about 40% of the state's residents, 570,000 households, are financially unstable and unable to afford essentials like housing, food, transportation, and child care.

Not that they'll put it all together as they struggle to make ends meet, but how should the ALICE people react to the celebration of the state employee pension fund and the rising costs of housing and local education that result from state government's encouragement of illegal immigration?

Chris Powell has written about Connecticut government and politics for many years. (CPowell@cox.net) His other columns are here.