"Can Connecticut be Saved?"

Sydney M. Williams

swtotd.blogspot.com

Thought of the Day

“Can Connecticut be Saved?”

October 11, 2018

“Remember, you will be faulted not because you are ignorant against your will,

but because you neglect to seek out what makes you so.”

                                                                                                Saint Augustine (354-430)

Connecticut is in my blood. While I grew up in New Hampshire, I was born in New Haven. During the Second World War, while my father was overseas, my mother returned to her parents in Madison, bringing her [then] four children, including me. In December1965, my wife and I bought our first house, a cape in Glastonbury. A year and a half later we moved to Durham, and four years later to Greenwich. After two decades in that tony suburb, we bought a house in Old Lyme. Two and a half years ago – after a quarter century of idyllic living on the marshes – we moved to Essex.The State resonates with personal history. Two ancestors served as colonial governors (John Webster in 1656 and Thomas Welles in 1655 and 1658). Another two fought in King Philip’s War – Daniel Hotchkiss, a six-great grandfather, served as a sergeant and Captain Stephen Greenleaf, a seven-great grandfather, was wounded at the Battle of Hatfield (Massachusetts) in September 1677. A five-great grandfather, Captain Caleb Hotchkiss was killed during the Battle of New Haven in July 1779, during the American Revolution. Their blood courses through my veins and those of my children and grandchildren. Forefathers are buried in New Haven and Hartford. It is the State in which I was born, have lived most of my life and where I expect to be buried.

So, what has gone wrong with this State, with its magnificent Connecticut River and estuary, its hills, seaports, harbors, country churches, world-class universities, parks, meadows, beaches, towns and cities? Why is Hartford, once the richest city in the United States, on the verge of bankruptcy? Along with Hartford, Waterbury, Bridgeport and New Haven have credit ratings that rank in the bottom 10% nationwide. Why did Bridgeport, the state’s largest city, re-elect a man as mayor who served seven years in prison for corruption during his first term? Why have Hartford and New Haven landed on a list of the nation’s hundred most dangerous cities? What happened to industries like insurance and manufacturing? Connecticut is still wealthy. In terms of GDP per capita, the State ranks 3^rdin the nation and is 6^thin median household income; yet, it ranks 4th in terms of state and municipal debt per capita.

Why does Connecticut rank 4th in the nation in terms of the percent of the population moving out-of-state? Is it, as Governor Malloy would have us believe, because youth wants to live in cities, not suburbs, or is it because the State is unfriendly to business? Its corporate tax is 9^thhighest in the nation and its personal income tax is 10^thhighest. Is it because the State’s economy has shrunk at an annual compounded rate of 0.5% over the past nine years, while Massachusetts’ (formerly known as “Taxachusetts) economy has grown at an annual rate of 2.1 percent?  Or is it because of a loss of freedom? In a 2016 survey, the Cato Institute ranked Connecticut 45^thin terms of personal and economic freedoms. In 1971, when we moved to Greenwich, the State, then with no income tax and low property taxes, was considered the “Switzerland” of the region for commuters into the City. It is now a State that is shunned. 

Between 1955 and 1980 fifty companies moved their headquarters out of New York City, with many moving to Stamford, a city of 130,000, which became the third largest center for corporate headquarters, after New York and Chicago. Today there are ten States that have more S&P 500 companies’ headquarters than the entire State. In the past three years, Aetna, General Electric, Alexion Pharmaceuticals and Duracell have moved out. UBS and RBS (Royal Bank of Scotland) have abandoned their trading floors in Stamford. In a CNBC business ranking of States, Connecticut scored 45^thin terms of the strength of its economy, 26^thin terms of business-friendly, 43^rdin cost-of-living and 46^thin cost of doing business. Overall, it ranked 37^th, with education (9^th) being its most positive attribute. In an April 2017 analysis of the nation’s fifty states by the American Legislative Exchange Council – which looked back over the decade 2005-2015 – the State ranked 49^thin economic performance and 46^thin economic outlook. (In 2012, when the current governor Dan Malloy took office, the State ranked 36^th.) 

In bygone days, Connecticut had been attractive to business. It had some of the nation’s finest universities, an excellent public-school system, an educated and well-paid labor force, low property taxes and no income tax. Into the mid 1980s, the State continued to do well. It had weathered the outward migration of textile and rubber businesses. A September 18, 1984 New York Timesreport noted that the State was “on a roll,” led by defense spending, corporations moving out of New York City and with small, technology companies replacing brass mills and textile plants. “Most of New England is doing well, but Connecticut stands out,” said James Moor, director of economic research for the Hartford Insurance Group. Unemployment stood at 4.3% versus a nation-wide average of 7.1%. Per capita income was second only to Alaska’s. 

But things began to change. As is common, there is a pendulum-like swing to political parties. In the 1960s, the American Federation of State, County and Municipal Employees (AFSCME) – a union founded in 1932 – became more aggressive in Connecticut. The union had been founded to counter the patronage system that caused thousands of workers to lose their jobs every two or four years, as political parties changed. During the 1960s and early 1970s, Yankee traditionalism gave way to social revolution, with its emphasis on civil and women’s rights. (I remember attending, as an alternate delegate, the State Democrat convention in 1970 – the booze, the noise, the pot-filled air gave a sense of the surreal to those of us there.) In 1973 state workers in Connecticut were granted the right to organize, with teachers getting the right in 1975.  As public sector unions expanded in numbers and influence, the power of private sector unions waned. The 1970s recession put pressure on manufacturers, so managements switched retirement programs from defined benefit plans to defined contribution plans. Keep in mind, when corporations experience financial stress bankruptcy is an option. It is also an option for municipalities, but not for states. Today, according to the Yankee Institute for Public Policy, 94% of Connecticut’s 50,082 fulltime public employees are unionized, earning an average of $73,036, about the same as median householdincome in the State. Current unfunded retirement benefits amount to $100 billion, meaning each of the State’s 3.5 million residents is responsible for about $30,000. Unfunded healthcare benefits add another $10,000 to each of our liabilities.

With the intention of offsetting rising unionized labor costs, higher transfer payments and diminishing State revenues, then Governor Lowell Weicker (Connecticut Party), in the summer of 1991, signed the State’s first income tax legislation. In doing so, he violated a basic principle of governmental fiscal math – increased taxes do not result in smaller deficits. They are always used to justify higher expenditures on new projects, never to reduce debt or ameliorate the expense of existing programs. A simple flat 4.5% income tax in 1991 has been expanded to a complex – 6.99% at the high end – tax, with seven brackets. Deficits have widened, and unfunded pension and health benefits have ballooned. The only beneficiaries have been lawyers, accountants, moving-van companies and State employees.

What has been good for Connecticut’s government workers has not been good for everyone else. A report from the Bureau of Economic Analysis showed that personal income growth in Connecticut in 2017 was 1.5%, versus 3.1% for the nation, placing the State 44^thout of 50 and the lowest in New England, behind both Maine and Rhode Island, the traditional laggards. Governor Malloy’s tax increases have neither bettered the State’s income prospects nor alleviated its budget and unfunded pension and health liabilities.

The most attractive option for many of the State’s high-earners and wealthy retirees has been to abandon ship. According to the Yankee Institute, in the fiscal year ending June 30, 2017, 20,179 residents left Connecticut, taking with them $2.6 billion in adjusted gross income, or $128,846 per individual. During the year, the State accepted 18,000 migrants from outside the United States. As a rule, (and not surprisingly) immigrants’ consumption of a State’s resources, in their first two or three years, exceeds their contribution. Even excluding any costs associated with immigrants, lost tax income to the state – from those who chose to leave – amounted to about $100 million. Only New York, New Jersey and Illinois had a greater percentage of their population leaving.

Since Mr. Weicker introduced the income tax to Connecticut, the fiscal situation of the State has deteriorated, under two Republican governors and one Democrat – Republican John Rowland (who went to jail); Republican Jodi Rell, who switched her residency to Florida once she left office, and the current Governor Democrat Dan Malloy, who raised taxes more than all other governors combined and who has the dubious distinction of bearing the lowest approval rating of any governor in the Country. While neither Republican governor stemmed the bleeding, there has been, throughout this period, one constant: A Democrat-controlled legislature. The last time the State had both a Republican Governor and a Republican Legislature was 1976. Forty-two years is a long time for one-party rule. Should Connecticut elect a Republican Governor anda Republican House and Senate there is no assurance that sanity would return, but it is the best shot we have to emerge from the darkness that has enshrouded the State. To travel with Ned Lamont down the road paved by Dan Malloy would be to do “the same thing over and over and expecting different results.”[1](A vote for the third-party candidate Oz Griebel, with his poll numbers barely out of single digits, is to vote againstyour second choice.) The decision, when one walks into the voting booth on November 6, is easy – vote for Bob Stefanowski and the Party that has not had a majority for half a century.

Contractual agreements with unions have starved other programs badly in need of assistance. A recent report cited by CNBC ranks Connecticut the 4^thworse in terms of infrastructure. Sixty-two percent its major roads are in “poor or mediocre” condition. Eight percent of its bridges (more than 300) are considered “structurally deficient.” Eleemosynary institutions, which serve physically and mentally disabled and disadvantaged children and adults and that depend on State support, are being starved for funds, forcing them into the competitive world of private solicitations. Can Connecticut be saved? The State needs a re-boot and its unions and leaders must face the consequences of what they have wrought. Bankruptcy may not be an alternative, but Venezuela serves as an example of what happens when socialistic, business-unfriendly progressives, on empty promises, seize power. Everybody loses. 

As I wrote at the start of this essay, Connecticut has long been my home and I would prefer to have it remain so. It is also home to two of our children and seven of our grandchildren. I wish them the same love for its history and its natural beauty. I want them to look upon the State not only for its past achievements but for what it can accomplish in the future. Be proud of its education system – its public and private schools and its public and private universities. The State was once the region’s Mecca for freedom, economic growth and universal wealth creation. There is no reason it cannot be so again. We grow most confident and we look forward most assuredly when we have, as mole said in The Wind in the Willows, “…the special value of some anchorage in one’s existence.” Connecticut has served that purpose in the past. Now, it is up to the voters to let it fulfill its promise for the future.    

            

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[1]A quote generally attributed to Albert Einstein.