Pushing off payments is going to be a theme this year, I can feel it.
In my last Connecticut post, I noted the plan to push off pension payments til later. Someday. Sure, we’ll fully pay for the pensions, eventually.
Anyway, the new thing is to have the towns in CT pay for their share of the unfunded teacher pensions liability, rather than having it all smooshed together at the state level.
But first, yesterday the governor of Connecticut was giving his formal budget address.
GOVERNOR MALLOY ON THE BUDGET
HARTFORD, Conn. (WTNH)– It’s state budget day at the State Capitol and Governor Dannel Malloy rolled out the budget plan. It’s a plan designed to cut more than a billion and a half dollars in spending as the state continues to face a ‘low growth’ economy and massive obligations to the state employee pension fund.
Malloy touts no tax hikes but the elimination of $200 property tax credit hits homeowners that make under $100,000.
Malloy admits that deficit is $1.7 billion but says $320 million will come from revenue collections. Malloy will cut $400 million in town aid by requiring towns to pay that amount to the teacher pension fund.
The revenue increases will come from an increase in tobacco tax, an elimination of property tax credit and the reduction in earned income tax credit. When it comes to the tobacco tax, that would be the same as in New York which is $4.35 per pack.
Malloy projects $700 million in savings from labor concessions. The $700 million in labor concessions is wanted in labor negotiations. The alternative would be 4,200 more state employee layoffs. The administration says it is optimistic that labor concession will equal $700 million, avoiding layoffs.
Oh, I bet I will be hearing from the not-bargaining-in-my-interest UConn faculty union about those concessions.
There were a bunch of tweets on that news page that I elided over… is that going to be a thing in regular news now?
LOOK AT INCREASED REVENUE FROM GUN PERMITS
So, about the “increased revenue”, here’s one of the “revenue increases”, I suppose:
Gun owners will see huge increases in permit fees that would raise millions of dollars to help the state combat its two-year, $3.6 billion deficit.
As part of his budget, Malloy is proposing to increase the state portion of the pistol permit fee from $70 to $300. He also is proposing the cost of the initial 5-year pistol permit fee from $140 to $370.
The increase in fees for gun owners will bring in another $9 million to the state annually, according to the governor’s budget estimates.
Additionally, Malloy is proposing to increase background check fees from its current $50 to $75.
That increase, the governor’s budget estimates, would bring in another $2.6 million annually to the state’s coffers.
Malloy’s proposals on guns were immediately panned by the president of the Connecticut Citizens Defense League.
“We feel that the increase of Pistol Permit fees 400 percent is astronomical,” Scott Wilson, CCDL president said. “This will have a deep impact on those who only wish to protect their own lives, and the lives of their families. Many Connecticut gun owners are struggling with the current economic conditions in our state.”
I wonder how much revenue the increased pistol permit fees will actually net.
I just want to point out that when Malloy pushed for an “assault weapon” registry post-Newtown school shooting, only about 15% of such owners actually complied. (Estimated, obviously).
I just looked at pistol permit info, and it seems the permits last five years. A long enough period for people to mysteriously lose said pistols while boating. Lots of people like to sail in CT.
I think part of Malloy’s estimate of increased pistol permit revenues was due to increased permit applications post-Newtown, and while permits will obviously follow sales in the gun shops in CT, it’s the whole “continued ownership” thing where his projections could fall short.
Also, I hear the new president is having a negative effect on gun sales, so even the new permit growth may be depressed.
But the big fight will be the towns picking up pension expenses.
Let’s go to the tape: The official, prepared budget address has the following remarks:
There’s a very large portion of education aid that’s almost always left out of the conversation. I’m talking about how we pay for teacher pensions.
This year, state government is set to pay $1.2 billion for a system that supports 86,000 active and retired teachers and administrators. So you see, when we talk about funding for education, we have to include the state contribution to teachers’ pensions as part of that conversation.
Now I want to be very clear – the teachers’ retirement program is a sustainable, well-organized system, and hardworking teachers make a six percent contribution to it. I am not proposing that teachers’ benefits be limited or cut back.
Teachers retirement pension system has always been funded without any contribution from towns or cities. My budget does not propose that we demolish that system or shift the entire costs to towns.
But this year, as we continue making cuts to state services, and as we ask state employees to find saving, we need towns to begin sharing the cost of their employees’ pensions. After all, teachers are municipal employees. The state doesn’t pay the pensions of policemen, or firemen, or anyone else.
As such, my budget asks our towns and cities – all of them – to contribute one-third of the cost toward their teacher pensions.
In the current fiscal year, the state is spending $24 million to cover the pension costs of teachers and administrators in our most affluent municipality, Greenwich – a school district that enrolls 8,800 students.
Compare that to the City of New Britain – a city with a higher concentration of poverty – which enrolls 10,000 students, where the state will provide only $18 million to cover pension costs for teachers.
That’s 25 percent less funding for a system with 14 percent more students.
I’m not blaming our wealthy towns for this inequity. It’s not their fault. We need to do a better job. We need to make the system more reasonable.
And to do that, we need towns to partner with their state in fully-funding teachers’ and school administrators’ retirement benefits—not all of the cost, but part of it.
To be sure, the rich towns are providing more tax revenue to the state than other ones — how many of the billionaires the state of CT keeps close tabs on live in Greenwich?
A very high percentage, I think.
CT is not the only state that has this problem — Illinois, for one, has this issue. Calstrs… well, that’s something else. But I will get to that another time.
TOWNS PUSH BACK
Now, there were pre-buttals to Malloy’s budget proposal, as this idea of cost-sharing has been floated before.
NORWALK — The public school district would face a mass layoff of employees, including teachers, if a budget proposal by Gov. Dannel P. Malloy is put into place, school officials said.
The proposal would require towns and cities that now pay nothing into the retirements plans of local teachers to contribute more than $400 million a year.
Malloy made the announcement during a late-morning news conference, saying it’s only fair that the municipalities pay a third of the annual $1.2-billion cost that the state pays and which is supplemented by 6-percent contributions from 50,000 active teachers. There are about 36,000 retirees.
The employer share of Norwalk’s teacher-pension costs next year is scheduled for $27.6 million. Under Malloy’s proposal, the city would have to pay $6.3 million of that cost.
“If imposed, we’d have to lay off many employees, including teachers, to balance our budget,” said Mike Lyons, chairman of Norwalk’s Board of Education. “Considering that we are underfunded $20-30 million by the state already, this imposition on Norwalk would be unconscionable.”
However, Malloy said “Connecticut has caused its own problems and the ones it hasn’t caused, it ignored. We need to change the way we pay for teachers and schools.” The General Assembly is currently facing a $1.7-billion deficit in the budget scheduled to start July 1.
Officials across the state immediately complained of the proposed shift in the retirement program, which has never required municipalities to give to the plans.
State Sen. Len Fasano, R-North Haven, said Malloy’s school plan is merely an attempt to push the state’s budget problems onto the towns and cities.
State Rep. Gail Lavielle, R-Wilton, called the proposal a “major tax increase in disguise.”
“Shifting such a massive cost to towns and cities means an enormous hit to municipal budgets,” she said. “While it makes the state budget look better on paper, the total expense is still borne by Connecticut’s taxpayers.”
Joe DeLong, executive director of the Connecticut Conference of Municipalities, said the shift of pension payments would mean about a billion dollars more over the next two-year budget cycle.
“Such a colossal cost transfer — even given the current fiscal realities and the need to look at all areas of state and local spending — only reinforces the urgency to address the structural changes needed to give municipalities new tools for revenue diversification to keep in line with the overwhelming number of other states,” DeLong said.
Trumbull First Selectman Tim Herbst said Malloy’s plan is a way to elude the responsibility of addressing the projected $1.7 billion deficit.
Gov. Dannel Malloy’s proposal comes as state faces budget shortfall; measure could force local governments to raise property taxes
Connecticut Gov. Dannel Malloy said Friday he wants to shift more than $400 million in annual teacher pension costs from Hartford down to cities and towns, as the state wrestles with ways to balance its budget.
If adopted, the measure could force local governments to find new ways such as property-tax hikes to offset the new costs.
Mr. Malloy’s proposal comes as the state faces a budget deficit of about $1.7 billion for the fiscal year that begins in July. The governor, a Democrat, plans to submit his budget plan to close that shortfall on Wednesday.
“I’m going to ask for a lot of additional sacrifices,” Mr. Malloy said at a news conference Friday.
The state currently pays about $1.2 billion annually toward the pension system for teachers across the state. Towns and cities don’t pay into the system. Mr. Malloy’s proposal, which would have to be approved by the Legislature, wouldn’t reduce pension benefits for teachers, who pay 6% of their of their salary into the pension fund.
Fairfield First Selectman Michael Tetreau said his town would have to pay $27.5 million toward teacher pensions under governor’s plan. Mr. Tetreau, Fairfield’s top municipal officer, said the town would have to raise property taxes by 10% to cover that.
“I’m in totally disbelief that anyone would even propose that,” Mr. Tetreau said. “It merely transfers the tax burden from the state to the town, but it’s still the same taxpayers that are paying for it.”
Joe DeLong, executive director of the Connecticut Conference of Municipalities, called Mr. Malloy’s proposal a “colossal cost transfer.” He said local governments would urgently need to tap new revenue streams in order to make these pension payments. His group has called for the creation of a 1% local sales tax for all of Connecticut’s cities and towns to bring in new cash.
“It’s a full-frontal assault on local taxpayers,” said Peter Tesei, the first selectman of the town of Greenwich. It will “further drive local taxpayers to move elsewhere,” he said.
Mr. Malloy said the state currently pays into the retirement system based on factors it can’t control, such as how many teachers a town can afford to hire and how much they pay them. It is not based on student enrollment or need, Mr. Malloy said.
As someone in NY where each school district has to pay for its own teachers’ pensions (and salaries, etc.) and the state will help support poorer districts while rich districts like mine have to pay our own costs directly, I really don’t have a huge amount of sympathy.
Similar to the suburban Illinois teachers pensions issue. It makes sense for the towns & cities to pay for the pension costs.
All that said, Malloy isn’t proposing a decrease in state income taxes in line with less state support for these pension costs. So he would be forcing those communities to increase their taxes.
And yeah, CT local taxes aren’t cheap. So. This is going to be tough.
The stuff I saw so far above didn’t indicate increase in any of the CT taxes I pay as a NY resident who works in Hartford. I don’t think the “concessions” being proposed for CT workers will affect my adjunct job, because I do not participate in the pension plan (I had a choice to — I decided not to.) If I lose my adjunct job, or they drop the pay to where I cannot cover my extra costs for doing it [which happened one semester, but I allowed it for only one semester], oh well. I’m an interested onlooker at this point.
In any case, this is just the opening bid. I’ve seen the cost-sharing idea out there before, and it gets pushed off. We’ll see where this one ends up.
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