AUGUST 30, 2010
By CONOR DOUGHERTY

State tax revenue rose in the second quarter, as higher taxes and the slowly improving economy led to an increase in collections.

Overall tax revenue increased 2.2% in 47 states that have reported their receipts for the three months ended June 30, compared with the same period a year ago, according to a report to be released Monday by the Nelson A. Rockefeller Institute of Government at the State University of New York.

This marks the second quarter in a row of recovering tax collections—and follows five quarters of declines in revenue that hammered local-government budgets. The latest figures are still a mixed bag: Some states continue to see declining revenue, but those were offset by states that saw increases.

States continue to face financial pressure, in part because tax collections remain below the levels of two years ago. In addition, aid to state income provided by federal stimulus funds is starting to fall away. Signs that the economy is flagging add to the gloomy outlook for state coffers.

“Most states still show a mismatch between revenue and spending trend lines,” said Robert B. Ward, deputy director of the Rockefeller Institute. “It’s not time to put away the red ink yet.”

Declining expenditures by state and local governments shaved 0.1 percentage point from second-quarter gross domestic product, according to a Commerce Department report on Friday. The nation’s 89,000 local governments, everything from states to cities and school boards, have seen persistent layoffs over the last two years.

State and local governments shed 48,000 jobs in July, the biggest number in a year, according to the Labor Department. The sector, which now employs about 19.5 million people, has cut 169,000 jobs this year, including 102,000 in the past three months.

President Barack Obama recently signed legislation that will provide some $26 billion in budget assistance for states. Still, many economists think crimped local-government budgets will continue to drag on growth this year and next. Most state and local governments require a balanced budget, so weak revenue forces spending cuts or tax increases.

“Federal help will buy them more time, but doesn’t change the fact that they’ve got to cut expenses,” said Nigel Gault, chief U.S. economist at forecasting firm IHS Global Insight.

The second-quarter gains were driven by growth in sales and income taxes, both of which have been raised in many states. Second-quarter sales-tax revenue increased 5.9% in the 47 states surveyed by the Rockefeller Institute, while the take from personal income taxes grew 1.6%. Collections from corporate income taxes, which tend to be volatile and are just a small slice of most states’ collections, fell nearly 19% over the period.

Some 30 states saw tax revenue in the second quarter rise from a year earlier. Many of the strongest performers were places where collections were hard-hit by the recession. Florida saw a nearly 14% increase. Arizona—which, like Florida, has been among the states most affected by falling real-estate prices and lackluster construction activity—saw a 3.9% increase.

Still, revenue declined in several big states. In California, tax revenue declined 0.9%, despite a nearly 12% increase in income-tax collections largely driven by higher taxes, according to the Rockefeller Institute. Illinois saw revenue decline 7%, while Michigan’s collections fell 3.8%.

Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved

No matter who is elected, the next governor will likely seek givebacks

Ken Dixon, Staff Writer
Published: Sunday, August 29, 2010

Connecticut’s state employees might be excused if they think they’re wearing a bull’s-eye.

With the state facing a $3.5 billion deficit next year, both Democratic and Republican candidates in the gubernatorial race are looking to rein in health care and retirement benefits for state workers and perhaps take a bite out of the size of the 55,000-person workforce.

Connecticut’s state employees make on average about $65,000, more than $14,000 above the average pay for all workers in the state and second only to New Jersey among government workers in the region. State employees also receive health care and retirement benefits that typically are more generous than what’s available in the private sector.

The state’s overall payroll expenses represent about one-third of Connecticut’s overall budget.

Democratic gubernatorial candidate Dannel Malloy, his Republican opponent Tom Foley and underdog Independent Tom Marsh want the coalition representing unionized state employees to negotiate possible concessions and givebacks.

It’s part of a nationwide trend, as states coping with massive, recession-driven deficits scramble to cut expenses and, in some instances, to deal with structural pension deficits. Connecticut’s unfunded liability for retirees’ health benefits is more than $24 billion, one of the highest, on a per-capita basis, in the nation.

“There’s a clear trend to look at retirement benefits, both pension benefits and retiree health benefits, to reduce costs so the programs are sustainable in the long haul,” Ron Snell, director of state services for the National Conference of State Legislatures, said in a phone interview from the organization’s Denver offices.

“Some states acted this year to reduce benefits and increase contributions for new employees,” Snell said, adding that there are many impediments to reducing benefits for existing workers.

“It could certainly happen for new employees, though,” Snell said. “It’s clear that states around the country have also been moving the cost of health care for active employees to the employees.”

Vermont this year increased employee contribution rates in its retirement system from 9 percent to 9.5 percent and its teacher’s retirement system from 3.54 percent to 5 percent.

Snell said the NCSL hasn’t seen too many instances of salary reductions, but the organization recently released a report indicating that 10 states froze pay this year. “There have been furloughs to reduce payments, but they haven’t reduced salary levels,” he said. Smaller state work forces, through attrition, early retirement incentives or layoffs are on the rise, he added.

A MYTH OR REALITY?

Peter M. Gioia, vice president and economist for the Connecticut Business & Industry Association, the state’s largest business organization, said it’s plain that without union cooperation it will be very tough for the next governor to craft a balanced budget as required by state law.

“If you’re going to have huge cuts, north of $2 billion or $3 billion, it will be impossible to get there without significant union concessions or layoffs,” Gioia said in a phone interview. “Obviously, what’s going to drive most of the changes are revenue increases or real cuts and concessions.”

To be sure, the range of pay that goes into the state average includes modest salaries for clerical and custodial employees all the way up to six-figure salaries paid hospital and university administrators as well as agency directors. Gioia said that while pay structure for state employees varies by position, there are indications that “many” jobs may be “somewhat” overpaid compared to the private sector.

“But retirement benefits and retirement health care benefits and health care benefits for employees are very excessive compared to normal practice in the private sector,” he said. “The thing that’s an enormous challenge is they are written into contract, so first you have to be in agreement on reopening it, then get to negotiations on that contract.”

According to the state Comptroller, in-state retirees and their families can select the identical health insurance plans they had as active employees and in most cases at lower costs, or no cost at all. After 10 years of service, employees become fully vested for retirement health benefits, so they can leave state government, pursue private-sector careers, then go back to the state benefits at age 62.

At this point, the State Employees Bargaining Agent Coalition, the 13-unit state union group that last year negotiated more than $700 million in savings with Gov. M. Jodi Rell, is reluctant to give away anything more.

They say that many state workers are highly educated and underpaid, compared to professional counterparts in the private sector.

A contract negotiated by John G. Rowland, the former governor, runs until 2017. But state unions last year agreed to the $700 million in savings, including seven unpaid furlough days, increased insurance co-payments, a one-year wage freeze and an early retirement program that took more than 3,800 veteran employees off the payroll.

Dan Livingston, a Hartford lawyer who’s the chief negotiator for SEBAC, calls it a “myth” that Connecticut state employees are overpaid and said Rell’s administration has essentially been “uninterested” in working with the unions.

According to the federal Bureau of Labor Statistics, in May, 2009, the nearly 1.65 million jobs in Connecticut paid an average income of about $51,000, more than $14,000 less than the average state employee receives.

“This is a very difficult moment for all but the very wealthy in this state and country,” Livingston said. “The struggle is for good jobs and benefits for all working families. Attacking the rights of some working families at the expense of others is false and cynical.”

THE CAMPAIGN DEBATE GOES ON

Foley and Malloy, winners of their August 10 primary, have started waging a spirited debate over who is best-equipped to deal with the deficit.

“We simply can’t afford to keep doing what we’ve been doing,” said Foley, a private investor from Greenwich and former U.S. ambassador to Ireland who’s campaigning for his first elective office. “The part of the budget accounted for by state employees and their benefits, we can’t afford it.

“It’s either going to have to come from a reduction in the cost of benefits, which are 60 percent of payroll and double those of the private sector, or reductions in the size of the state workforce that can come from attrition,” Foley said. “But in order for the state to provide the services it does, or through attrition, we need more flexibility and changes to work rules.”

Foley says his career as a corporate executive has given him the background needed to cut state costs and focus on bringing new jobs to a state that’s slogging through a recession where unemployment is threatening to top 10 percent.

His opponent agrees that while costs have to fall, his approach to achieving savings will be more collaborative and more effective.

“I have made it very clear that if I’m lucky enough to be elected, the unions are invited to the table to help address the $3.5 billion budget gap,” said Malloy, the former 14-year mayor of Stamford. “I’ll begin that process by going through their suggestions. I will either implement those or tell them why I can’t do it.”

Malloy portrays himself as an experienced municipal executive who has successfully worked with unions to cut costs in Stamford with minimal effects on public services.

“I have been very vocal that with respect to things like longevity payments they have to be capped,” Malloy said, adding that there are too many layers of management in state departments and too few workers providing services.

“I want to encourage an atmosphere where people can make decisions at the lowest level,” said Malloy, who has vowed to reduce patronage employees in the executive branch by 15 percent and wants the legislative branch to follow suit.

He also believes the state can reduce the number of agencies by a third in a relatively short period of time.

`Every worker should have a wage they can live on …’

Steven Kreisberg, the national collective-bargaining director for the American Federation of State, County and Municipal Employees, said proposed givebacks vary from state to state, depending on their general financial jeopardy.

“We’ve just come off of a year in California where employees have been furloughed 3 days a month with devastating impacts,” he said in a phone interview. “California is in far more dire straits than Connecticut. The percentage of total revenue lost there because of the housing bubble far exceeds Connecticut.”

Kreisberg said that Nevada has also suffered from the housing-fueled economic crash to the point where state government is now 30 percent to 40 percent smaller than a few years ago.

“On a relative basis you’ll see a lot of variation among the states,” he said. “In many cases the situation is more akin to pay freezes and lack of salary growth and worker reductions through attrition and layoffs. We have also seen substantial numbers of furloughs that have the effect of a general layoff.”

Earlier this year, Rell issued an executive order creating the Post-Employment Benefits Commission, which is expected to work until mid-September on possible long-term and short-term options.

Proposals include making most employees hired after 1997 contribute more than the 2 percent of their salaries they currently put into the retirement fund; changing the current defined benefit plan into a program similar to 401(k) plans; raising the retirement age from 62 to 65; and basing retirement benefits on the average salaries of five years instead of the current three.

John Olsen, president of the state AFL-CIO and a former Democratic State Central Committee chairman, disputed the premise that state unions should give back retirement benefits to be more in line with employees in private companies.

“That’s like saying that someone beats their wife, therefore I should,” he said. “Just because someone in the private sector doesn’t get a pension doesn’t mean union workers should give up negotiated pensions. Every worker should have a wage they can live on and a pension.”

Susan Buchter, 57, of Ansonia, a social studies and civics teacher at Bullard-Havens Technical High School in Bridgeport, said she loves her job, but made her share of concessions last year, with the one-year wage freeze, furlough days and increases health care contributions.

A former machine-shop owner who has taught at the technical school for eight years, Butcher, the school’s teacher of the year in 2006, said she’s not focused now on retirement benefits.

“I still have a lot of years left to work,” said Butcher, a member of the State Vocational Federation of Teachers. “What’s more important for us is what we do for the state, providing quality education for a job force that’s going to work for all of us.”

© 2010 Hearst Communications Inc.

Published Aug 27, 2010

After reading the article titled “Foley fends off late charge for GOP win,” published Aug. 11, and comments by Donna Roberto, a co-worker at the Department of Revenue Services, I must respond.

Before I answer Ms. Roberto’s claims about state employees, a little must be said about Connecticut’s Republican Party. Connecticut Republicans can’t blame Democrats and state employees, because Republicans have been in charge for 16 years and have always had the same boilerplate approach, that balancing the state budget starts and ends with state employees.

It is hypocritical and disingenuous for Ms. Roberto to claim state employees are paid too much and benefits are “unbelievable” while she collects her paycheck and likely avails herself of the so-called “unbelievable benefits.”

Ms. Roberto also claims to understand the problems the state is facing while others around her are clueless. I respectfully ask her to expand on that.

Dollar for dollar, public employees do cost-effective work and have been part of the solution – last year we gave back $750 million – though this current crisis was brought on by the business sector, including banks, brokerage houses and such.

I shudder to think what will happen if Connecticut is really run like a business.

Shariq Iqbal
Hartford

The Day Publishing Company, New London, CT USA
Copyright © 1998 – 2010

By Amy Traub     - 08/26/10 01:19 PM ET

The nation’s middle class is under attack. The recession hit private businesses and public budgets hard, but Americans’ ability to attain or hold onto a middle-class standard of living may be the ultimate victim. We’re losing jobs, losing services we depend on, losing pay and benefits. Yet instead of working to build up the middle class, a growing chorus of pundits insists that dragging down city and state workers across the country is the answer to our economic woes. Democratic mayors and governors fall for this ploy at their peril: it threatens the nation’s economic recovery, and feeds into conservatives’ anti-government, anti-worker agenda.

Democrats are at their best when they promote the creation of good jobs that enable working people to support a family. They have their work cut out for them: with persistently high unemployment, companies boast that they can now hire highly productive workers at a lower wage with fewer benefits. It’s no wonder that corporate profits are up 44 percent while working people have yet to benefit from the expansion. Economic growth on these terms erodes the middle class and threatens to split the nation between the wealthy and everyone else. With midterm and gubernatorial elections on the horizon, voters recognize that this is the wrong direction for the country.

Despite the evident pain and political discontent caused by the disappearance of good jobs, we hear growing calls to put the same destructive dynamic that’s destroying the private sector middle class into motion in the public sector. Although the best research indicates that city and state employees nationwide earn less in pay and benefits than similarly-situated private sector workers, critics complain that the quality of public sector jobs may not be deteriorating as quickly as it is in the private sector. They point out that states and cities could operate more cheaply if they turned public jobs into the same type of contingent, no-benefits, low-paid work that’s eating away at the private sector middle class. Privatization and outsourcing are means to the same end.

But trashing our middle class in an effort to cut costs is short sighted. Downgrading the middle-class pay and benefits of public workers only speeds their erosion in the private sector, undermining everyone who works for a living. Democrats who sign on to this agenda are betraying their own values: rather than parroting conservative talking points, they should be working to rebuild job standards in the private sector, throwing their weight behind grassroots efforts to expand living wage laws and guarantee paid sick days to workers in cities and states nationwide. Rather than attacking public pensions that afford retirees a middle-class standard of living, they should be thinking about how to increase retirement security for millions of private sector employees with meager savings.

Buying into the attack on public workers undercuts the economy more broadly. The Economic Policy Institute calculates that for every 100 public sector layoffs, 30 private sector jobs are lost, primarily because the former public workers no longer have the incomes to support local businesses. In contrast, promoting middle-class jobs in both the public and private sectors creates the economic demand necessary for growth. As economists point out, there are few other sources of this demand in our economy today.

It’s easy to lose sight of the other ways that a strong public sector supports our economy. Middle class Americans and the businesses they work for rely on good schools, clean and safe streets, and high quality public services and infrastructure. In so doing, they depend on the dedicated teachers, police, firefighters, librarians, sanitation workers, parks employees, and support staff that keep states and cities running.

States and cities face very real fiscal challenges, but the cause is falling tax revenue due to the deepest recession in decades — not excessive spending or lavish compensation for public workers. What’s more, these fiscal difficulties pale in comparison to the challenges faced by Americans struggling to make ends meet, work their way into the middle class, or just hang on to what they’ve got. Their plight is the nation’s real economic crisis, and they deserve far more in terms of policy solutions than either party has offered.

Amy Traub is director of research at the Drum Major Institute for Public Policy, a nonpartisan think tank focused on advancing progressive policy in cities and for cities.

© 2010 Capitol Hill Publishing Corp., a subsidiary of News Communications, Inc.

Martin B. Cassidy, Staff Writer
Published: Wednesday, August 25, 2010

PORT CHESTER, N.Y. — Metro-North Railroad riders at the town’s station said Tuesday they would consider buying tickets one stop up the line in Greenwich in order to skirt a possible fare increase next year.

Under a proposed increase included in a plan to make up an $800 million deficit for the Metropolitan Transportation Authority, Metro-North monthly fares from Port Chester and neighboring Rye stations would shoot from $226 to $247, surpassing the $237 price at Greenwich stations.

“It is a real concern,” said daily Port Chester commuter Javier Torres, 43. “We’re middle-class people trying to make a living and the money would be something we can use for some other purpose.”

To help balance its operating budget, the MTA next month will begin considering a range of fare increases ranging between 7.6 and 9.4 percent at various New Haven line stations in New York; it hopes to put the fares in effect in January.

With Connecticut having so far having parried any fare increases to and from its stations, Metro-North expects Rye and Port Chester passengers would inevitably buy the cheaper tickets from nearby Greenwich stations to skirt the increase, Metro-North spokeswoman Marjorie Anders said.

The situation is unique for New Haven line, being the first time fares at a Connecticut station, which are farther from Grand Central Terminal, would be below those of a New York station, she said.

“I would probably take advantage of that,” said 32-year-old J.J. Henderson, of Port Chester, who commutes from the town station. “It would be a shame if we got the short end of that and it would make sense to do it.”

Because of Connecticut’s decision to avoid New Haven line fare increases this year, Metro-North is seeking an agreement to lessen the effect on Port Chester and Rye riders by having Connecticut pay Metro-North the difference between the cost of a Greenwich and Port Chester, ticket.

The agreement, often called a “hold-down” fare agreement, assures that price levels remain even across state lines, as Connecticut chooses to put off fare increases, Anders said.

Under the agreement, the state would pay Metro-North a certain amount for each monthly ticket sold at the Port Chester or Rye stations, thereby keeping the price of a monthly ticket at Rye and Port Chester to $237, Anders said.

Connecticut’s monthly payments would be calculated on total ticket sales at those stations, Anders said, including subsidies for all forms of peak and off-peak tickets.

Metro-North Railroad is currently finalizing a similar agreement with New Jersey Transit, Anders said.

“Finally when Connecticut DOT raises fares, Metro-North would then adjust the Rye and Port Chester, fare to $247 and the hold-down payments would stop,” Anders said.

State Department of Transportation spokesman Judd Everhart declined to comment on negotiations to reach a payment agreement with Metro-North.

Everhart also said the DOT hasn’t decision on whether to move forward with required fare hearings on other revenue-creating proposals the MTA has put forward.

Among the recommended measures would be eliminating a 2 percent discount on monthly tickets, and a 4 percent discount on a combined monthly tickets and 30-day-Metrocard purchased by mail.

To try to reduce revenue lost from uncollected tickets, the railroad would seek to invalidate unused one-way and round-trip tickets within seven days instead of six months, and unused ten-trip tickets after three months instead of a year.

Port Chester resident Nora Freeman who uses ten-trip tickets said she thought it was unfair for the MTA to shorten the period in which tickets remained valid during a time where wages are stagnant and commuting costs already claim a significant share of income.

“It’s ridiculous for the fares to be going up and up and to lose something you’ve already paid for,” said Freeman, a speech pathologist.

Connecticut Rail Commuter Council Chairman Jim Cameron said if Connecticut, which has final say over fare changes, service cuts, and other policies affecting Connecticut riders, were to accept MTA’s cost effectiveness proposals and eliminate discounts it would subvert earlier pledges to keep fares level and serve as a “back-door” fare hike for many riders.

Last May, Gov. M. Jodi Rell dropped a proposed 10 percent fare hike for Metro-North and a proposed 40-percent fare hike for CTTransit buses after an outcry that the increases would discourage use of mass transit, and in the case of buses, disproportionately affect low-income residents.

“These changes are really no more than a hidden fare increase and they are not helpful in encouraging ridership on the trains,” Cameron said. “It looks as though the MTA are scrambling to find every nickel and dime they can, and doing a stealth fare increase like this will just discourage people from wanting to take the train.”

Staff Writer Martin B. Cassidy can be reached at martin.cassidy@scni.com or at 203-964-2264.

© 2010 Hearst Communications Inc.

Robert A. Frahm
August 24, 2010

Connecticut’s neighboring states of New York, Massachusetts and Rhode Island are among 10 winners of the second round of the U.S. Department of Education’s Race to the Top school reform competition.

Connecticut failed last month to make a list of 19 finalists for the Obama administration’s $4.3 billion competition designed to improve low-performing schools.

U.S. Secretary of Education Arne Duncan announced awards today for Florida, Georgia, Hawaii, Maryland, Massachusetts, New York, North Carolina, Ohio, and Rhode Island and the District of Columbia.

Two other states – Tennessee and Delaware – won awards in an earlier round of competition.

Connecticut failed to qualify for up to $175 million in Race to the Top funds despite a sweeping school reform package passed by the state legislature in May. It was the second time Connecticut failed to make the cut. An earlier application also was rejected in March.

Connecticut’s latest application received a score of 379 points of a possible 500 – an improvement of 34 points over the score on its earlier application, according to results released today. Nevertheless, out of 36 applicants, Connecticut ranked 25th – the same rank it held in the first round of competition.

Massachusetts scored 471 points, the highest score in the second round. New York had the second highest score, and Rhode Island the fifth.

“I do think Massachusetts has done an extraordinarily good job with its education reform act over the last decade,” said state Education Commissioner Mark McQuillan. “I’m not at all surprised.”

McQuillan said he plans to do “a fine-grained analysis of our scores. I’m not happy to think we couldn’t get close to 400 points. I thought we would.”

Alex Johnston, chief executive officer of the New Haven-based school reform group ConnCAN, said, “Our neighboring states really all had significant progress. We are really now surrounded by winners. These are states that have all the challenges we have.”

Race to the Top is designed to address a chronic achievement gap that finds many low-income and minority students lagging far behind their white and more affluent classmates. Connecticut has some of the largest gaps in the nation.

Johnston, who was part of a group that helped shape the state’s education reform bill, said the reform efforts in the winning states were largely influenced by governors while Connecticut’s reforms came out of the legislature.

“The legislature certainly did its part in Connecticut,” he said. “The real missing piece was executive branch leadership.”

Gov. M. Jodi Rell, who is not seeking re-election, has drawn criticism from Johnston and others for keeping a low profile during the debate over reform.

Dan Malloy, Democratic nominee for governor, issued a press release calling today’s announcement “a reminder that Connecticut has shown a complete inability to compete against other states – including its immediate regional competitors – for federal funding.

“We can’t keep losing like this,” he said.

Later, in a telephone interview, Malloy said the governor should have taken a leading role. “That’s how it’s done in other states,” he said.

Some, including Commissioner McQuillan, have criticized the federal strategy of making states compete for education funds, saying it creates a nation of winners and losers in school reform.

State Rep. Andrew Fleischmann, D-West Hartford, said he had doubts about the competition even before Connecticut failed to qualify as a finalist.

“This whole Race to the Top process – I’m no longer a believer in it,” said Fleischmann, co-chairman of the legislature’s Education Committee.

He said some of the reform models for which states are being rewarded in the federal competition are unproven. He said, for example, that charter schools, an approach favored by the Obama administration, have produced mixed results in research studies.

The competition “leaves 39 states receiving zero dollars out of a [$4.3] billion dollar pot, and there are literally millions of students at risk in those 39 states,” Fleischmann said. “It does not make sense to pit states against one another.”

In Connecticut, educators and lawmakers have said the failure to win the federal funds could delay some of the reforms in the education legislation passed in the spring.

Under those reforms, the state is scheduled to impose more rigorous high school graduation requirements, ease restrictions on charter schools, create a fast-track system for training and licensing school principals, revamp the state’s education data collection system, and establish a system to evaluate teachers based in part on how their students perform.

In addition, the legislation requires low-performing schools to establish governance councils of parents, teachers, and community leaders with the authority to recommend a complete overhaul of schools that consistently fail to improve.

Federal officials pledged to work with all of the applicants, including those states that were not awarded funds.

“We had many more competitive applications than money to fund them in this round,” Duncan said. “We’re very hopeful there will be a Phase 3 of Race to the Top and have requested $1.35 billion dollars in next year’s budget. In the meantime, we will partner with each and every state that applied to help them find ways to carry out the bold reforms they’ve proposed in their applications.”

©Copyright 2010 The Connecticut News Project

Bit by bit, financial responsibility for some of the most important public services is being passed on to you

MONDAY, AUG 23, 2010 08:30 ET
BY ALYSSA BATTISTONI

It has come to this: Parents are now being asked to send their children to school with their own toilet paper. And not just toilet paper, but all sorts of basic items that schools themselves used to provide for kids. It’s all part of a disturbing trend, highlighted by the New York Times last week, of cash-strapped public schools — their budgets eviscerated by state cutbacks — shifting more and more financial responsibility onto parents.

Privatization meant transferring responsibility for entire programs or functions to the private sector. But with the drastic budget cuts that states have been forced to make, responsibility for public services and programs is literally being forced into private hands one roll of toilet paper at a time. We’ve entered the era of backdoor privatization.

On the surface, these stop-gap measures don’t seem unreasonable. After all, it’s hardly new for parents in well-off school districts to chip in for supplies, music classes and even teacher’s salaries in an effort to minimize the effect of school budget cuts on their children. What is new, though, is the extent to which families are being asked to contribute basic items. This may be too much to ask of parents who are struggling to pay their own bills — especially since they’ve already paid taxes that are supposed to support the public school system.

Nor is backdoor privatization a phenomenon limited to local schools.

Public university systems are increasingly emulating private universities by turning to wealthy alumni for donations — even as tuition rises because some legislators see hiking it as a way to raise money for their fungible state budget items.

Missouri, Georgia, and Arizona have been forced to slash their transit budgets and services, leaving hundreds of thousands without a way to get to their jobs, or to a doctor, or school. This has forced thousands of people to revert to private modes of transportation.

Many states have also cut funding for fire and police departments, resulting in slower emergency response times and diminished crime investigation. Fire department cuts have exacerbated the trend in wildfire-prone areas (among those who can afford it) of hiring private firefighting companies to protect homes, heralding a return to the 19th-century practice in which private firefighting companies raced each other to put out blazes and collect their reward.

Some towns have even started to shut off street lights to save money on electricity bills.

This backdoor privatization diminishes the quantity and quality of the services available to the general public while nurturing the growth of a parallel profit-making infrastructure for those who can afford supplementary services.

Presumably, such budget cuts are temporary, a product of the recession. But it’s not hard to imagine a future in which, say, ever-strapped state and local governments decide to follow the private sector’s lead in taking advantage of new “efficiencies.” In fact, some schools are already refraining from hiring needed teachers despite receiving federal dollars to help tide them over for the year. And even temporary cuts can do a lot of damage: Public transportation reductions, for example, can force people to give up jobs that require them to commute to work.

Certainly, some budget cuts are necessary in difficult economic times. But when we decide it’s better to turn off street lights and shut down bus lines than to raise taxes on the rich, reduce charitable tax deductions, or create a value-added tax, we are deciding that the quality and availability of the public goods should be determined by the amount individuals can pay — and not the amount a rich nation can afford. It’s a choice that undermines not only our claim that we value “ordinary Americans” as equals but also our ability to produce the healthy, educated, productive population on which our future prosperity depends.

The best-case scenario is that the impact of these cuts will help people understand just what their tax dollars are paying for and spur greater consciousness about the relationship between public spending and public goods. Now that shortages of teachers and books are spreading to suburbia, we’ll decide that shortfalls in education funding are unacceptable after all.

The worst-case scenario, though, is that reduced public spending on essential goods and services will continue to hollow out our infrastructure and reduce our capacity to meet the needs of most Americans. And that rather than have a real conversation about which public goods we consider essential and what we’re willing to do to pay for them, we’ll gradually starve core programs until working- and middle-class Americans grow accustomed to a lower standard of living while better-off Americans pay out of pocket for benefits that everyone once enjoyed.

Here’s hoping for a wake-up call.

Alyssa Battistoni is a writer and graduate student in geography and environment at Oxford University.

Copyright ©2010 Salon Media Group, Inc.

by Christine Stuart
Aug 22, 2010 9:18pm

Rosy projections over how much revenue Connecticut would receive from the federal government has thrown budget projections $63.4 million into the red less then two months into the new fiscal year.

Gov. M. Jodi Rell announced the bad news Friday when her budget office released its monthly letter to state Comptroller Nancy Wyman.

Connecticut’s share of federal Medicaid and education funding was $193.4 million less than state budget anticipated. However, the deficit comes despite an improvement in projected state income and sales tax collections. Income tax collections are up $127.5 million and sales tax collections are up $153.8 million.

“I will be working with my budget officials to erase the shortfall through administrative actions,” Rell said. “The fiscal year has barely begun and we have an opportunity – one we cannot afford to miss – to control this deficit before it grows unmanageable. I will be announcing the details of my budget-cutting plans soon.”

But despite the desire to cut, the expenditure side of the budget remains a challenge as the demand for services continues.

Expenses are currently projected to exceed the budget by $171.7 million, in part because of continued high demand for social services and in part because planned savings, such as $50 million in cost-cutting that is supposed to be achieved by the legislature’s Commission on Enhancing Agency Outcomes, has not materialized, Rell said.

Leaders in the Democratically-controlled legislature had a different take on the budget situation.

While acknowledging the decrease in federal revenues was disappointing Sen. President Donald Williams said the Rell administration has not done its part to find savings.

“Making matters worse the Rell administration has apparently given up on making $170 million in spending cuts,” Williams said Friday. “All of the savings from these cuts, much of them proposed by the governor herself, are included in the budget. Given the size of the state’s fiscal challenges, it is imperative that the Rell administration makes the difficult decisions necessary to reduce spending.”

As for the $50 million in savings expected from the legislature’s Commission on Enhancing Agency Outcomes, those numbers aren’t due until the end of the year, Williams said.

“We’re also disappointed that Gov. Rell is writing off $50 million in savings included in a legislative report that isn’t due until the end of the year,“ Williams said. “The bipartisan Commission on Enhancing Agency Outcomes submitted an initial report that identified opportunities for significant savings and we encourage the executive branch to aggressively pursue them.”

© 2005–2010 CTNewsJunkie

Saturday 21 August 2010
by: Ellen Dannin
t r u t h o u t | Op-Ed

It wasn’t that long ago that the “smart” thing was to take on debt. But not anymore. It’s no surprise that people today fear being crushed by debt. But for our own and our country’s well being, we need to put government debt into perspective.

First, frugality is certainly a virtue, and buying only what you can pay for from cash on hand is often, but not always, prudent. Many of us have used home, automobile, business and student loans. In most cases, those were not bad decisions, even though it took years or even decades to pay them off.

Our federal government is borrowing now to get us through an economic crisis with our country and its people and institutions intact. It is also investing to build for the future. If we are so worried about debt that we fail to invest in people’s education, skills and health, this country will certainly be the poorer for it.

Second, unfortunately, we have coasted for generations on infrastructure and institutions our grandparents built, crucial investments such as the Golden Gate Bridge and the Hoover Dam. These things are our real wealth. If we continue to let our roads, educational system, and other infrastructure crumble, if we do not have modern transportation, communications and science, we and our children will not be truly safe and secure.

We must make a commitment to build and improve, as prior generations have, even though we do not have the cash on hand now. We stand to lose far more than we gain if fear of debt leaves us with irreparably damaged power, water and sewage systems. We also need to bear in mind that government’s very long life span gives them time and many options to pay off debt.

Third, debt or decline are not our only choices. We can tap sources of revenue that actually create a fairer tax system. Changes to tax law in recent decades have let the wealthiest among us pay an increasingly smaller percentage of their income as taxes. Income taxes paid by the top 400 taxpayers have been cut in half since 1995. As a result, in 2007, the most recent year for which we have information, every one of these super-rich received a tax cut of $46 million. Had just these 400 people paid taxes at the rates in effect before those tax cuts, the federal budget would have an additional $18,400,000,000 each year and not be worrying about debt. And that’s just 400 of the super-rich.

The extraordinarily wealthy who get these tax breaks may honestly think they deserve to keep every penny they have because they believe they are self-made people. But they didn’t do it alone. They owe their wealth to this country’s public infrastructure, for which all of us have paid. This includes the roads on which their employees drive to work, a public education system to train their workers, police, courts and our system of laws. It is easy to forget that people like to do business in the United States because the legal system we paid for means their contracts are enforced. It is time they paid their fair share.

Ask yourself: Is our country better off with a tax system in which the richest do not pay their fair share while so many of us are financially struggling? Are we, as a people, better off now than in the decades when tax burdens were fairer as during the Eisenhower administration? The decades when the richest stepped up to the plate were the years when we had full employment and built things in this country.

We are all in this together. Only when all of us share this obligation of citizenship can any of us be truly safe and secure.

Ellen Dannin is Fannie Weiss distinguished faculty scholar and professor of law at Penn State Dickinson School of Law and author of “Taking Back the Workers’ Law – How to Fight the Assault on Labor Rights.”

This work by Truthout is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.

Keith M. Phaneuf
August 20, 2010

Gov. M. Jodi Rell’s deputy budget director unveiled a new plan Thursday to shave $300 million off annual pension costs by boosting worker contribution rates, raising retirement ages and developing a new 401(k)-style retirement plan for new employees.

The proposals, offered to the governor’s Post Employment Benefits Commission, were part of a larger plan to stabilize the Connecticut’s severely under-funded pension program that also includes an end to retirement incentive programs and larger annual contributions by state government.

“As a long-term strategy it seems to make sense, to introduce some stability,” Michael J. Cicchetti, deputy secretary of the Office of Policy and Management and chairman of the commission, said during a meeting in the Legislative Office Building.

Cicchetti, whose group is expected by mid-September to issue a blueprint for stabilizing retirement benefit programs, also called for new restrictions on retiree health benefits, including an end to coverage for vested state employees who leave for private-sector jobs before retirement.

“It’s probably not something we can do overnight,” Cicchetti said of several components of his plan, noting the huge funding gaps in retirement benefit program budgets developed over decades.

The next full actuarial valuation of the state employees’ pension fund isn’t due until November, but a preliminary analysis for the commission projects government should contribute just under $1.03 billion next fiscal year. That’s up $185 million from the $844 million being contributed this year.

The annual contribution should cover two costs: the pension benefits that are accrued by covered employees during the year; and the amount needed to cover past years when the state failed to contribute enough.

It’s the latter expense that is plaguing Connecticut now.

According to the last valuation, the pension fund had $19.2 billion worth of obligations, or liabilities, and held just under $10 billion–an amount equal to 52 percent of its liability. Actuaries typically cite a funded ratio of about 80 percent as healthy.

Connecticut governors, legislatures and worker unions have a history, during tough fiscal times, of allowing reduced payments into the fund, without changing the level of benefits that still must be paid out. For example, Rell, the current legislature and the State Employees Bargaining Agent Coalition has allowed $314.5 million in pension fund payments to have been deferred since 2009.

A retirement incentive program offered in 2009 also weakened the pension fund, trimming salary expenses in the short-term while prematurely stripping the fund of assets that would have earned more in interest over the coming decades.

Further complicating matters, the 20-year contract reached in 1997 by SEBAC and then-Gov. John G. Rowland allows the state to calculate its annual pension contribution based on a fixed percentage of overall payroll. Rather than following a level payment schedule, that system effectively allowed for smaller annual contributions earlier in the deal, with escalating payments as the deal nears its end in 2017.

Cicchetti said the state should eliminate its bad habits. That means switching to a level payment schedule and avoiding future retirement incentive programs. This could add an extra $363 million to next year’s contribution, he estimated.

To offset nearly $300 million of that added cost, Cicchetti proposed a battery of new worker costs and limits on benefits, including:

• Adding 3 percentage points to the share of salary that each worker must deposit into the pension fund. Most workers currently contribute between 1 and 2 percent, depending on when they were hired.
• Raising the retirement age for all workers hired after 1984 from 62 to 65.
• Increasing penalties for early retirement outside of state-approved incentive programs.
• Calculating pensions based on the average salary of a worker’s last five years, rather than the current three.
• Creating a new defined contribution plan, similar to the 401 (k) programs offered by many private-sector employers, for new state workers.

State government faces an even larger problem with the health care benefits its offers to about 42,000 retirees and 100,000 dependents. The long-term liability of covering current and future retirees and their spouses over the next three decades, is projected at $21.7 billion. The state, which has saved just $10 million toward that expense, basically operates a pay-as-you-go system, paying for the benefits each year out of its budget with little investment earnings to help cover the cost.

A report issued to the commission in June projected that annual spending for this benefit, which is expected to top $490 million in this year’s $19.01 billion budget, will begin rising dramatically. If Connecticut remains on the pay-as-you-go system, the average cost over the next 28 years will be $1.9 billion.

To help counter this trend, Cicchetti proposed requiring all workers to contribute toward this expense. Currently, only new workers and those hired within the last five years must contribute 3 percent of their salary toward this benefit.

Another proposal would end the so-called portability of retiree health benefits.

Currently, any state employee with more than 10 years of experience can leave state service for another job, and still claim that health benefit upon retirement. Some other states only provide health care to individuals who retire directly from state service.

Salvatore Luciano, a commission member and veteran state union leader, predicted this only would increae the ranks of Connecticut’s uninsured, and lead more people to seek free treatment in hospital emergency rooms – an expense the state already helps to cover.

But commission member Julie E. McNeal, an officer with the Connecticut Society of Certified Public Accountants, said blocking those who leave state service from enjoying state-funded health benefits upon retirement would leave them no worse off than those in the private sector. “There should be individual savings available as well,” she said, “just like the rest of the world.”

Most recommendations offered Thursday also would require approval of state employee unions.  Luciano predicted labor would object to those that ask workers to sacrifice to cover state government’s failure to save properly.

“Even if we stopped the pensions tomorrow, we’d still have huge liabilities,” he said, adding state officials need to adopt a more progressive tax system that recognizes “this amazing huge gulf” of wealth and requires the rich to pay more.

©Copyright 2010 The Connecticut News Project