Saturday, December 10, 2016

Connecticut's Continuing Pension Crisis

Connecticut's traveling Governor Dan Malloy never ceases to amaze me with his economic illiteracy and irrational and costly economic plans.  The newest piece of economic garbage comes in the form of addressing Connecticut's pension crisis.  Connecticut's pension funds are severely underfunded and in many cases former state employees are able to able add their overtime, mileage costs, etc. to their final pension amounts.  Thus Connecticut's pensions are broke with taxpayers footing the bill.
This new Malloy plan that does nothing to increase workers contribution levels nor cut back on pension payouts.  About 25% of all state employees contribute nothing toward their pension benefit. Most others pay 2%.  For comparison purposes 7% is the national average of contribution. The beauty of Connecticut's political spoils system is that Connecticut taxpayers must be forced to pay incredibly large pensions to non union state managers, commissioners, judges, state elected officials who in most cases do not contribute a penny to their lifetime payout.  This is not addressed in Malloy's proposal.  Nor what is addressed is why the actual pension liabilities have been pushed down the road to 2032 a time when most Connecticut's political elite will be receiving their pensions in a low taxed state like Florida.  The complexity of this proposal astounds as me as I (as an economist) am having trouble as to how explain it.  It looks like the state will increase its funding somewhat to their pension liability in the hope that their rate of return will increase.  If it does not increase then most of the debt will be pushed back to 2032 and at that time some new plan will be presented.
My plan is simple.  All 25% of those state employees who do not contribute to their pension will now start to contribute 7% of their income from dollar one with no cap.  Their pensions would be capped at a 30% level of highest income.  This is still generous.  The other state employees who now only contribute 2% of their incomes would see an increase to 7%, all new state employees would be placed in a self funded retirement plan.  All life time medical benefits would end for any state employee just retiring, they can either be offered the state exchange health care plan or a similar type of Medicare plan that we in the private sector must accept.
Remember Connecticut is broke.  It ranks last in pension unfunded liabilities.  It has run out of ways to tax its remaining citizens.  Connecticut taxpayers need not fund a lifetime of excesses for those who have political connections in Hartford.  It is time to take back Connecticut's bloated pensions.

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