Senate Candidates Debate Best Way to Address State’s Pension Fund Deficit


Candidates for the 26th and 36th State Senate Districts discussed how best to address Connecticut’s $100 million-plus pension fund deficit, which has been called one of the worst in the country, during a lively debate hosted by the New Canaan League of Women Voters Monday at Town Hall.

“Our pension unfunded liabilities have more than doubled, from 87% of assets to 200% of assets, in 10 years,” explained Republican incumbent Sen. Toni Boucher, who seeks another term representing the 26th Senate District, before a packed house. “We’re putting ourselves a great risk. This [pension fund deficit] is something that is talked about in Wall Street and in the ratings agencies all the time.”

Finding a workable solution that is amenable to politicians on both side of the aisle, however, is “not going to be easy,” Boucher said.

She said Governor Dannel Malloy’s recent decision to refinance the state’s unfunded pension obligations out another 30 years is “only going to exacerbate our problem” by “adding $11 billion in costs for taxpayers and future generations.”

“This is wrong – and [Gov. Malloy] did it without even adjusting and phasing-in a 401K plan to replace the defined benefit plan,” said Boucher, who serves as a Chief Deputy Senate Republican Majority Leader and is co-chair of the House Education and Transportation committees, as well as vice-chair of the Banking and Finance, Revenue and Bonding committees.

“In fact, the contract that the executive branch negotiated, on a straight party line vote last July, put us in great jeopardy, putting these pension benefits out 10 years, guaranteed no layoffs and no outsourcing whatsoever, and four years, lump-sum bonuses, and really quite honestly wage increases that will cost us $323 million more in the next couple of years,” Boucher said. “This was very irresponsible and we need to revisit all of that – wages, health care, and our pensions – to reduce them and structure them so they are affordable and we can protect future generations from a fiscal calamity.

Will Haskell, a 22-year-old political newcomer who is challenging Boucher on the Democratic ticket, pointed out that the $100 billion in unfunded pension liabilities is the result of years of negligent behavior on the part of folks on both side of the aisle in Hartford.”

“Teachers paid dutifully into their pension accounts and legislators did not,” Haskell, a resident of Westport and recent graduate of Georgetown University, said. “But rather than litigating the past, it’s time to move Connecticut forward. That’s why I support the legacy obligation trust model – which takes some of our underutilized state assets and it donates them to an independently managed trust.

“We own, in the state, about 3,500 buildings – and many of those buildings would be far more profitable under independent management,” Haskell said. “If we direct the profits made off those assets directly into the pension fund, it would address our liabilities over the next decade. It’s not a silver bullet, but anyone running who is saying they can fix Connecticut’s pension crisis overnight probably is not telling the truth. It took us four decades to get into this mess – I don’t think we can start on the right path by re-electing the same folks who have been in there for two decades. It’s time for a change.”

Boucher, in a rebuttal, pointed out that the Democrats have essentially “had control of the General Assembly for over 40 years … and in the last eight years, they had control over the Executive Branch, the House and the Senate.

“They had a golden opportunity to change things. But what did they do? More of the same – in fact, they exacerbated the problem.”

Alexandra Bergstein, a Democrat and political newcomer who is challenging Republican incumbent L. Scott Frantz for the 36th Senate District, said she agrees that the pension fund crisis “is our biggest issue – and we need to tackle it immediately.”

“I am very proud to say that I published an original solution, which is a fair and permanent solution, to the pension fund crisis,” said Bergstein, a Greenwich resident and former attorney with the law firm Skadden, Arps and the Children’s Defense Fund in Washington DC.

Bergstein said her shared risk model has already worked in other states.

“It would reduce our unfunded liabilities by up to 30% on day one and it would deliver fair and reasonable and secure payments to retirees,” she said. “It would deliver fiscal stability to the state – it could be done in under two years, if we had a governor committed to doing it.

“There’s already traction on this idea – the Connecticut Conference of Municipalities has shown interest and they are moving forward,” she added. “So, this is not a lightweight idea, this is a real solution.”

Frantz, a Greenwich resident who is now serving his fifth term in the 36th District, responded that had Bergstein “spent more time up at the capitol” she’d “understand how ruthless these unions are.”

“They will say ‘no’ to everything – they have no inclination whatsoever to pay anymore than their 1.5% contribution – or 3.2% at the high range – or take a cut in any of their benefits,” Frantz said. “It’s just not in their DNA. Their leadership is paid a lot of money to be pit bulls and put up every resistance known to mankind to any sort of suggestion like hers. It just isn’t going to work. It’s fiscally impossible.”

Bergstein, however, said, she’s “not afraid of unions.”

“They will have to come to the table because they really have no choice,” she said. “There isn’t the money to fund what has been promised to them. They are standing on a precipice; the political tide is entirely against them. They would be very wise to come to the table now and negotiate. My proposal would also require a constitutional amendment that mandates full funding – and that’s why the problem could not be repeated.”

Frantz, in a rebuttal, however, called Bergstein’s ideas “naive.”

“You’re not going to be able to get the union leadership or the union rank and file to come to the negotiating table – and even if you do, they’ll laugh your proposal out in a heartbeat,” he said.

“I have a lot of experience working with the unions up [in Hartford],” Frantz said. “And, in fact, I tried, my very first two years up there, to bring up bills that would have reduced the rate of assumed return for the pension funds from 8.5% – which is completely unrealistic – to a more realistic 5% to 6%, and the unions shouted me out of the committee room.”

The candidates discussed a range of other issues during the debate, including how to best fund transportation projects and how to address the state’s overall fiscal crisis, including whether the state income tax should be abolished.

On the topic of taxes, Bergstein said she “would eliminate the estate tax and gift tax immediately – because we are using more revenue than we are capturing.”

“I would also lower the corporate tax rate, because we have one of the highest in the country,” she said. “And we also give away $5.2 billion in special interest tax rates. [These cuts] would help small to medium sized businesses significantly.”

As far as the state’s personal income tax goes, Bergstein said she is in favor of rolling it back incrementally, “after we balance the budget,” but said she is not in favor of abolishing it completely, overnight, as it could be disruptive.

“I have a very concrete plan for balancing the budget – and it follows the recommendations of the bipartisan commission on fiscal stability and economic growth,” she explained. “They also said, unequivocally, we must install electronic tolls.”

Like Boucher, Frantz also took opportunity to blame the Democrats for the state’s current fiscal situation.

“We have blown it as a state for 48 years now,” Frantz said, adding that the whole time “the majority-party, single-party rule has been in charge of our economic engine – and it has run it, frankly, into a ditch.”

Frantz, who serves as the Senate Republican Co-Chair of the Commerce and Finance Committees, and also as Deputy Senate Republican Majority Leader of the Senate Republican Caucus, said the main problem has been “poor leadership in Hartford.”

“What is happening is, all us economic development people are taking three steps forward, and the state is taking two steps back for us,” he said. “We are creating one of the worst business environments in the entire country. And I am not exaggerating.”

Frantz compared Connecticut with Massachusetts, which, he said, has recovered 340% of the jobs that it lost in the recession. Meanwhile, Connecticut has only recovered 78%.

“In addition, we’ve lost 78% of our state GSP in the last eight years,” he said, adding the economy in Massachusetts is growing at about 3.7%, while Connecticut’s is flat to negative.

Bergstein said she has done “extensive research” into the state’s fiscal woes before developing her own solutions. For example, she recently had discussions with the Business Council of Fairfield County to find out why businesses are no longer attracted to the state.

“The top two reasons businesses aren’t coming to Connecticut are failing infrastructure and our pension crisis,” she said. “I have a detailed plan to address those. So, it’s fine to spend a lot of time describing the problems and pointing fingers. I would rather edge in constructive dialogue, talking about real solutions.”

Boucher said she is in favor of abolishing the state income tax because, in her view, it would help attract people and businesses back to the state.

“Connecticut had no state income tax prior to 1991 and unfortunately we are losing a lot of our valued citizens to other states because of it,” Boucher said. “We have to take a long hard look at the other sources of revenue that other states have and how they’re using it, and how Connecticut ran without it prior to 1991. And while that study is underway, we can jumpstart by getting rid of waste, abuse and fraud – and also with a healthy dose of cutting spending. Zero-based budgeting and better agency oversight and renegotiating state congrats could go a very long way toward getting our spending under control.

“That’s why you need more Republicans in the state House and Senate – so we can pass sensible and workable budgets – and yes, look at the corporate and income tax,” Boucher added. “That personal income tax was a temporary tax. The real estate conveyance tax was a temporary tax. The inheritance tax was a temporary tax.”

Haskell, however, said he opposed the idea of abolishing the income tax completely, overnight, because it could result in disruption of state services.

“It’s not often the case with public policy that we have a concrete example of what worked – and how well it worked,” Haskell said. “But with eliminating the income tax, we have the example of Kansas.

He explained that after the state of Kansas rolled back its income tax, it ran into serious revenue problems and “they could not keep schools open for five days a week – and many of their teachers fell below the poverty line.”

“I think what makes Connecticut so great is the wonderful public schools,” Haskell said. “We need to continue to make those long term investments. Yes, lets reduce the corporate tax and let’s eliminate or reduce the gift and estate tax – but a far better solution is to build Connecticut’s economy from the ground up rather than slashing taxes from up above.

“If you ask businesses why they are leaving Connecticut – GE, which went to a state that some call “Tax-a-chusetts” and Aetna is thinking about going to New York, a state with a higher corporate tax rate – is that Connecticut cannot provide a young, diverse, tach-savvy workforce. That’s what we need to do a better job of providing.

“We need to invest in diverse housing stock options,” Haskell said. “We need to revitalize our cities – and we need to improve our public transportation system to make this state more attractive to the next generation of workers.”

Leave a Reply

Your email address will not be published. Required fields are marked *