"We are not kicking anything down the road."
Gov. Dannel Malloy
In the middle of bipartisan negotiations with state lawmakers over a gap in the current year budget, Governor Dannel Malloy's administration unveiled a new series of measures aimed at making the state budget more sustainable in the long run. But the problem and the fix are so complicated that he called it "a little mind-bending" in a meeting with reporters.
The biggest part of the plan is an overhaul of the state pension system -- already broken into three tiers of employees, hired during different periods of state largesse -- which would now essentially be split in two.
The employees hired pre-1984, who have by far the most generous state benefits, would be part of a "pay as you go" system, where benefits would be covered as part of state budget expenditures. More recent employees would be covered by assets from the state pension fund.
The plan, laid out in a slideshow presentation by state budget chief Ben Barnes, would flatten out the year-by-year cost of funding the pension system, costing the state less over the next decade and a half, but substantially more after 2033.
"It provides budget stability. It addresses the nature of the pension benefits that we've provided in a logical way that we can afford, and that honors our commitments and the legal requirements of our pension system," Barnes told the group of state commissioners gathered indoors at Rentschler Field in East Hartford.
The administration promised more details about the complex plan at a later time, but Malloy told reporters he wanted everyone to know he was addressing a problem with the cost of state employee pensions that was first recognized in the 1970s.
"I want to be very clear," Malloy said. "We are not kicking anything down the road. In fact, what we’re doing is beginning making larger payments earlier. And we’re actually telling people what we’re doing."
“Clearly, something needs to be done," said State Comptroller Kevin Lembo in an interview, but he asked for many more details from the governor's office. "Please don't hear this as an indictment of the plan. It's just everyone who had this sort of tossed on them today is trying to figure out: what does this mean?"
Among the questions Lembo is asking:
- What does this plan mean for the state spending cap, which may have to be recalculated?
- What does it mean for the calculation of fringe benefits, which the state gets federal reimbursement for?
But the pension plan was only one part of the presentation that dipped into everything from transportation expenditures, to tax changes, to job cuts.
The size of the state’s workforce will be reduced by attrition, with the aim of getting rid of 500 jobs this year, while also deferring raises for non-unionized managers until January of next year.
Malloy said a unitary tax based on sales would be fair to consumers in the state.
The new unitary tax on corporations will be based on sales within the state, and not on the number of employees.
Malloy said this would encourage businesses to be headquartered in Connecticut.
"A big retailer that has tens of thousands of employees in a state -- but not necessarily in a store -- gets to write off a lot of the profits they make in Connecticut, because of the number of employees elsewhere," Malloy said. "What we’ve decided is to go to a system that most states have decided is a fairer system, and that is to a unitary factor, which is the actual sales. Having someone with tens of thousands of employees be able to write off all of the profits they made in Connecticut is not fair to the consumers or the taxpayers in Connecticut."
When asked whether these changes were meant to placate General Electric, the Fairfield-based giant that has openly talked of moving from Connecticut since the unitary tax was passed, Malloy told reporters: "These may make a difference to GE or not. In all of our discussions with GE, I’ve always made it clear that if they tell us what’s important, we can address what’s important."
