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.

Here are some of their quotes from last week. As always, union members are encouraged to post comments on the articles and commentaries where they feel comfortable weighing in.

Tom Foley:

“What I mean by common ground is that we all share a common purpose of creating and preserving jobs in Connecticut,” Foley told delegates Monday. He went on to talk about how government prevents entrepreneurship and job growth in the state.

“We simply have a government structure right now that is no longer affordable given today’s circumstances,” Foley said. “First and foremost, we need to reduce the size and cost of our state government. We simply cannot afford to keep doing what we’re doing.”

CT Newsjunkie – August 17, 2010
http://www.ctnewsjunkie.com/ctnj.php/archives/entry/labor_endorses_candidates/

“There’s only a certain amount of money that the government has to spend. They can choose to spend it on benefits or payroll. If the choice is benefits then there are going to be fewer state workers,” Foley said. “That really would be up to their representatives to negotiate and make that choice.”

Correction Officer Steve Curran gave Republican gubernatorial nominee Tom Foley credit for coming to speak to the labor union convention Monday, but he thought it was ridiculous that Foley couldn’t remember what union he belonged to when he worked at a cannery in his teens.

“Nobody forgets what local they belong to,” Curran said.

But Foley said he couldn’t remember.

“You know I actually can’t remember what union it was, but it was when I was working at a can plant in Denver, Colorado in the 1960s,” Foley said.

CT Newsjunkie – August 16, 2010
http://www.ctnewsjunkie.com/ctnj.php/archives/entry/foley_forgets_the_name_of_his_union/

Foley called a transition to home care a “win-win scenario. We can improve the care they receive and save money by moving to community based care providers… The state has to do what makes long-term sense. If there’s an alternative way of caring for people and it’s better care, then that’s a pretty easy decision for the governor to make.”

CT Mirror – August 20, 2010
http://www.ctmirror.org/story/7406/long-term-care

Dan Malloy:

But Malloy said he thinks the estimated $900 million in savings is overly optimistic given Connecticut’s aging population.

“What we may do is save money by not creating additional nursing home beds,” he said. “There are changes to be made in nursing home care, don’t get me wrong, but do I think that’s going to produce $900 million a year? The answer is no, I don’t. But I have an open mind.”

He said he would oppose cutting funding for nursing homes or for home care.

“I resist cutting both. … I am highly supportive of home care and I am also supportive of nursing home care,” he said.

CT Mirror – August 20, 2010
http://www.ctmirror.org/story/7406/long-term-care

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

by Christine Stuart
Aug 19, 2010 10:48pm

In addition to a $3.4 billion budget deficit, the next governor will have to contend with an unfunded pension liability and an even more daunting unfunded retirement benefit liability, but Gov. M. Jodi Rell said that she’s preparing a road map for her successor.

Rell’s transition budget, which is actually required to be presented to the governor-elect under Connecticut law, will include ideas she’s raised in the past such as agency consolidations, eliminations of boards and commissions, and other recommendations.

“There are some things we’ve recommended this year that we’d like to continue to focus on and that is just those ideas I put in the budget last year like consolidation of agencies, elimination of some boards, commissions, things that could actually save money,” Rell said Tuesday. “These are simply recommendations.”

Back in February Rell created a Post Employment Benefits Commission to make recommendations about how to fund the state’s unfunded pension liability and the unfunded post retirement benefit liability.

The commission, which was supposed to have finished its report in July, is expected to finish its work in mid-September.

At its meeting Thursday the group talked about a series of draft recommendations many of which will have be approved by the State Employee Bargaining Agent Coalition. However, the SEBAC agreement doesn’t expire until 2017, so the next governor will have to convince the labor coalition to open up it up in order for most of the recommendations the commission has been talking about for the past few months to make an impact.

Commission members had a lively discussion Thursday about whether the state should continue to provide health care coverage for spouses and dependents into retirement and if they should be covered at the same rate as the state employee. They also discussed whether employees with 10 years of service, who leave the state for the private sector, should still be awarded those benefits.

Michael Cicchetti, deputy secretary of the Office of Policy and Management and chairman of the Post Employment Benefits Commission, also suggested that if all state employees on average contributed 3 percent more to their benefits the liability could be reduced by $95 million.

Sal Luciano, a veteran labor leader and commission member, took exception to Cicchietti’s suggestions.

Under the 2009 SEBAC agreement all new employees contribute 3 percent of their salary to health insurance and all employees with the five years of state service contribute 3 percent until they reach 10 years of service.

He said the problem isn’t with the new employees, it’s with employees who came into service with the state before 1984 under the Tier I plan.

He said the Tier I employees account for about $14 billion of the $19 billion liability.

“The problem is Tier I,” Luciano said.

If the employee contribution for everyone was increased 3 percent, the retirement age was pushed up, and the state’s required contribution to the fund was based on level funding instead of as a percentage of payroll the state could shave a total of $298.9 million off next year’s pension liability, Cicchietti said.

Luciano said he’s not there to speak for SEBAC, which represents 45,000 unionized state employees, 42,000 retirees and their roughly 100,000 dependents, but believes the unions would object.

While it’s likely the unions will object to some of the commission’s recommendations, it may have also been vindicated by the one, which recommends avoiding early retirement incentive programs.

In April of this year as state budget negotiations were winding down, SEBAC rejected Rell’s call for another early retirement program in the wake of the 2009 early retirement program. The 2010 program would have saved $65 million in the short-term, but it would have added to the unfunded pension liability. When union leaders asked how much the 2009 retirement program would impact the pension fund, Rell’s budget director walked away from the negotiating table.

According to an actuarial report completed for the commission in June the pension plan holds just under $10 billion in assets, and about $19.2 billion in obligations, which is about 52 percent of its liability.

© 2005–2010 CTNewsJunkie

Keith M. Phaneuf
August 19, 2010

State government’s new contract watchdog agency is one of many that have faced budget cuts in recent years.

But key state lawmakers now are questioning whether the decision to effectively strip the Contracting Standards Board of all funding this fiscal year is costing more money than it’s saving.

“This was one of those penny-wise and pound-foolish cuts,” Sen. Gayle Slossberg, D-Milford, said Wednesday. “There is no other time when we need this board up and running more than we do now. It was short-sighted.”

Slossberg was referring to the decision by the legislature and Gov. M. Jodi Rell to cut the planned appropriation for the contracting board from $950,100 to $10,001. The latter is more of a token amount used to keep the agency’s account open rather than an allocation intended to fund any work.

The board, which began work in January but still lacks an executive director, was the linchpin of the so-called “clean contracting” statute enacted in October 2007, largely in response to the contracting scandals that drove former Gov. John G. Rowland out of public office into July 2004, and into a 10-month federal prison term. Rowland admitted he accepted about $100,000 in gifts from state contractors and from his staff.

“I really think we need to take another look at this next session,” said Rep. Christopher L. Caruso, D-Bridgeport, who co-chaired the Government Administration and Elections Committee in 2007 when the panel drafted the “clean contracting” statute. “The whole reason this was set up was to avoid corruption, but also to find efficiencies in government.”

Since the statute was enacted nearly three years ago, state officials have grappled with several budget deficits, and the contracting standards board has been one of several fiscal casualties.

The board was given a $665,000 budget in the 2008-09 fiscal year, during which it was supposed to prepare for full-scale operations in 2009-10. But both Rell and legislative leaders were slow in appointing board members, and most of those dollars went unspent.

Similarly, most of last fiscal year’s $775,000 for the board was canceled to help close a budget deficit.

Rell’s office declined to comment Wednesday, but both the administration and legislative leaders have defended the funding cuts in the past, arguing tough choices had to be made to close budget deficits.

Gale Mattison of West Hartford, who chairs the 14-member, volunteer standards board, said recently the panel has been unable to hire either of the two key paid staffers it needs to do its work, an executive director and a chief procurement officer.

One of the board’s primary responsibilities is to administer a new series of rules governing when state agencies can hire private sector contractors. Before privatizing most services currently performed by state employees, agencies must develop a cost-benefit analysis that demonstrates at least a 10 percent cost savings, and no loss in quality of service.

The law also makes the presumption that a “core governmental function should not be privatized,” and any department’s cost-benefit analysis arguing that private contracting is necessary must demonstrate that the agency in question lacks staffing to do the job properly.

One of the contracting board’s first challenges recently arose when the union representing about 1,000 transportation engineers, analysts and inspectors challenged the administration’s long-standing practice of hiring private companies to perform bridge inspection work.

The DOT insisted that because of its history of hiring private contractors in this area, a cost-benefit analysis wasn’t required, and Mattison said that after a review, he agrees.

But Mattison, a retired executive financial officer from the state Office of Policy and Management, also said the law empowers the standards board to order a review of any state service program once per year, regardless of other conditions. And given new questions raised by a DOT analysis of bridge inspection costs, he said he believes the contracting board should review the inspection program. But that would require the board to have paid staff to carry out the work.

“I thought the DOT was very forthright in what they were giving us,” he said. “But it still raises some questions about cost-effectiveness.”

The report submitted by Transportation Commissioner Jeffrey A. Parker and released by the State Contracting Standards Board showed the agency spent $50.1 million on private bridge inspectors and $24.1 million on comparable in-house work between the 2006-07 and 2009-10 fiscal years.

That same report also said state workers inspected about 46 percent of all highway bridge deck square footage. Highway structures comprise the bulk of bridges under DOT supervision, totaling about 5,300.

Local 2001 of the Connecticut State Employees Association-Service Employees International Union quickly hailed that as evidence that public sector employees, in this instance, were more cost effective.

“This shows the cheaper, better faster myth of the private sector is just that, a myth,” union spokesman Matt O’Connor said.

But Parker’s report did detail several factors that could explain higher costs tied to private sector work.

Private firms generally are assigned “the largest and most complex structures and bridges with difficult or time-consuming access requirements,” the report states, adding that larger bridges often require equipment the DOT either doesn’t have, or lacks sufficient numbers of, such as bridge scaffolding and lifts mounted on barges or boats.

The DOT also relies exclusively on the private sector to inspect the 330 railroad bridges under its care, which further inflates the cost of private inspections.

DOT spokesman Kevin Nursick declined to comment about the report Wednesday.

But O’Connor charged the agency’s reliance on contractors also is driven by insufficient staffing, a longstanding union complaint.

Parker’s report does state that “the department does not have on its staff personnel qualified to perform underwater inspections or the mechanical and electrical inspections of movable bridges.”

The report adds that “inspections of movable, suspension and other bridges with unusual design features often require highly specialized inspection knowledge and procedures. This expertise is most easily secured by CE (Consultant Engineering) firms which can access the needed engineering personnel from anywhere in the country.”

O’Connor said that the department’s inadequate staffing levels and longstanding practice of hiring private contractors has created a situation where a relatively small number of businesses can win contract awards at despite relatively high bids. According to Parker’s report, the DOT currently contracts with eight consulting engineering firms for bridge inspection work.

Slossberg said regardless of which side is right in this debate, if a contracting board analysis helped save even $1 million, it would cover the board’s entire budget – as originally planned – for this year.

“We know in the past that the state wasted millions of dollars on contracts and that’s why we passed this law,” added Slossberg, who has been a co-chairwoman of the government administration panel since 2007.

With state government facing a $3.37 billion deficit projection for the upcoming fiscal year that starts July 1, 2011, Slossberg, who also leads a legislative task force charged with finding efficiencies in state government, said the contracting board could be an effective complement to that effort. “It’s like there’s a storm coming,” she added, “and now that it’s raining, we’ve canceled our insurance.”

©Copyright 2010 The Connecticut News Project