In most elections, an incumbent governor has an extensive record and a vision for the future. Not so in Connecticut’s gubernatorial contest, despite that Democrat Ned Lamont is campaigning as if he is the fiscal savior of the state. He is claiming to have turned a $4 billion deficit into a $4 billion surplus.
That would have happened even if the governor’s office had been vacant.
Lamont had nothing to do with the turnaround, which is temporary in any case.
The temporary reversal of the state’s fortunes is a function of three factors. First, a torrent of federal COVID assistance money gushed into all 50 states, without any effort by state or local officials, Lamont included.
Second, the stock market enjoyed a four-year rocket ride, interrupted only by a brief swoon after the pandemic hit and the economic shutdown was first imposed. This produced ginormous capital gains. Individual income tax revenue from the state’s outsized population of wealthy investors flooded into the state’s coffers, without any involvement of Ned Lamont.
Third, this gusher of individual income tax revenue was diverted from spending by automatic fiscal restraints (mainly, the Volatility Cap, for interested budget wonks) that were imposed in the 2017 bipartisan budget agreement – an agreement struck half a year before Lamont even announced his first run for governor.
Moreover, the turnaround will be temporary. The last tranche of federal COVID assistance money will soon have been spent, and no more is on the horizon. And the stock market has fallen off its rocket and is on a bumpy downhill slide The fiscal restraints won’t come into play if the nation enters recession in 2023, as many economists now predict.
As to the future, Lamont has no plan.
Lamont wants to keep intact the state’s rainy day fund (aka Budget Reserve Fund or BRF), which has been bulging at the seams in recent years, with excess amounts channeled from it into the state’s underfunded pension funds by those automatic fiscal restraints. Lamont is judiciously cautious, but caution is not a plan.
Challenger Bob Stefanowski has called for the drawdown of $3 billion dollars from the BRF to fund business and middle class tax cuts. Stefanowski is right that citizens know better than government how to spend their money, and he is right that Connecticut’s sky-high corporate tax rate chases away businesses, which have been leaving Connecticut in a steady stream.
On the BRF – and this issue alone, it might be a standoff. But there’s another issue, one over which Lamont had total control and responsibility: negotiation of the new state employee wage contract (SEBAC 2022) that was inked last spring. Lamont completely mishandled it, which will cost the state hundreds of millions, if not billions.
Ever since 2017 there has been a fear that modest reductions in retirement benefits taking effect on July 1, 2022 would cause mass retirements in the months immediately beforehand as employees sought to avoid the reductions.
Indeed, Lamont paid Boston Consulting Group handsomely to study the issue beginning in 2020. BCG reported in March 2021 that over 8,000 state employees in the executive agencies alone (about 25,000 employees, plus or minus) would be retirement-eligible in fiscal 2022, and that 75% intended to retire.
First off, Lamont was negligent and procrastinated a full year until March 2022 to strike a deal.
The deal he negotiated failed to prevent the retirement wave. Over 7,000 employees (of a total of 50,000 plus or minus) retired in fiscal 2022 and July, the first month of this fiscal year.
Ignoring the fairness or unfairness of the wage increases involved, the structure of the deal was harebrained. Lamont paid huge bonuses and a year’s worth of a retroactive pay raise in lump sums in June just before the reductions in retirement benefits were to take effect for future retirees. So, employees pocketed the financial rewards and, then, retired in droves before the deadline.
As a result, the state has had to re-hire over 800 retirees, apparently to plug serious holes in the staffing of various operating units.
Where he had responsibility and control, Lamont demonstrated rank incompetence.
The state faces serious challenges in the immediate future. Connecticut cannot risk such incompetence at the helm, now that the fabled fiscal turnaround is reversing.
Likely more of the BRF cushion should be preserved than Bob Stefanowski suggests, but it is important to recognize that a cushion is not a solution. Lamont is haplessly incapable of forging solutions. He simply wants to hide behind the fiscal cushion, while taking undeserved credit for the way it was amassed. He claims to be hopeful and optimistic. But where is the plan? Once again, just claims.
Stefanowski is the truly hopeful candidate. He has a plan to use rainy day funds to reduce taxes to energize the economy. Having a plan is genuinely hopeful. He wants to change things in Hartford. Bob Stefanowski is the clear choice.