Don Pesci: How to fix Connecticut's fixed-cost problem

"Sisyphys'' (1548–49), by Titian.

Jim Powell asked in an eye-opening piece in Forbes magazine 67 months ago, “How Did Rich Connecticut Morph Into One Of America's Worst Performing Economies?"

A partial answer, freighted with supportive data, has now been advanced in a piece commissioned by The Yankee Institute titled “Above the Law: How Government Unions’ Extralegal Privileges Are Harming Public Employees, Taxpayers And The State." 

Everyone, both inside and outside the state, is intimately familiar with the bad news most of us have internally affirmed during the past few decades. Consider the rise in the Connecticut’s “fixed costs,” a fixed cost being one that can be reduced only by extraordinary, politically unlikely efforts: “In 2006, fixed costs constituted only 37 percent of the state’s budget; by 2018 that amount was 53 percent.” In 2016, the Census Bureau reported that Connecticut was one of only eight states to lose population. Fixed costs are strangling the state’s economy and pushing taxpayers and workers out of state.

Chris Powell, who lately retired as managing editor of the Journal Inquirer newspaper, in Manchester, Conn., was asked some time past what should be done about “fixed costs,” to which he replied, “Unfix them.” A fixed cost is one that legislators who have pledged their troths to unions are disinclined to unfix for politically insidious reasons. So long as decision-making in matters of salaries, pensions and benefits remain in the hands of unions negotiating in secret with obliging governors, cowardly legislators subject to reelection will be more than happy to deed their budget responsibilities to others who will "fix costs" so that they then cannot easily be ameliorated by constitutional means.

During Gov. Dannel Malloy’s first term in office, taxes in 2011 increased by $2.5 billion, a record jump that included a 20 percent surcharge on corporate profits. Another $1.3 billion hike occurred in 2015. So onerous are Connecticut taxes that the Tax Foundation “rated the state as 44th in the nation for tax burden, and the second worse – 49th – for property taxes.” Coincidentally, the non-partisan Office of Policy and Management and the Office of Fiscal Analysis showed “a combined downward revision of $1.6 billion in projected tax revenue for fiscal years 2018 and 2019 compared to estimates provided just five months earlier.”

The state was taxing more and getting less, not a surprise to anyone familiar with the law of diminishing returns. At some tipping point in the tax scale, tax increases produce less revenue. Steadily increasing labor costs reduce a state’s ability to meet other more important obligations – especially when the state is averse to implementing long term, permanent reductions in spending.

The late Prime Minister Margaret Thatcher famously said that the trouble with socialism is that “sooner or later, you run out of other people's money.” The same holds true in a progressive state like Connecticut, in which labor costs continue to rise but further taxation is no longer possible because there are limits, economic and political, to taxation . If you cannot reduce labor costs through sensible and necessary measures, and if you cannot meet rising costs through tax increases, the only remaining option open to you, if you are a professional politician, is to commit hara-kiri and deed the intractable problems to your successor – the path chosen by Governor Malloy, who had declined to defend his ruinous policies by running for a third term in office.

The way out of the dark and forbidding forest is the way in – in reverse. Connecticut must move “fixed costs” into the fixable column overseen by elected legislators. This can be done in part by removing pensions and benefits from items negotiated during union-administrative contractual lovefests. Better still, why not allow elected legislators to set all presently negotiated items through statute? By eliminating union contracts and collective bargaining altogether, the General Assembly will simply be reassuming its constitutional obligations; it is the legislature, not the governor in conclave with unions, that is constitutionally obligated to appropriate and expend tax money. It is our elective system of government that holds legislators responsible for getting and spending, and this constitutional authority cannot be farmed out to unions and arbitrators without fatally damaging our republican form of government. Who died in the Constitution State and left unions, arbitrators and cowardly House and Senate leaders our bosses?

In a summary section of “Above The law,” the Yankee Institute provides common sense reforms that, if instituted, “will restore democracy to the Constitution State and secure fairness for taxpayers." These reform measures include:  ending the supersedence of labor contracts over state law; prohibiting unelected arbitrators from writing law; promulgating a law requiring unions to undergo regular recertification elections by workers; require the publication and public distribution  of all government union reports; limit collective bargaining to wages only; prohibit government employee layoffs based solely on seniority; allow all government workers  to opt into union membership every year; at the same time, allow workers to refuse union membership and represent their own interests; enact right-to-work laws for private sector employees now operative in 28 states; eliminate card check and make secret ballot elections the sole method by which workers may select or vote out a union; and lastly, enact meaningful and long term public pension reform.

A government that cannot regulate itself cannot sustain itself as a representative republic, but must eventually become a fixed, inalterable administrative state that abolishes self-rule through constitutionally prohibited means – such as distributing constitutional obligations to unelected bodies unanswerable to the people.

Don Pesci is a Vernon, Conn.-based columnist.