Opinion: Borrowing from our children

How much money do you think is okay to borrow from your children to pay for your retirement?  Gov. Ned Lamont and the Democratically controlled Connecticut state legislature have decided $27 billion is an acceptable bill to hand to our children – that is billion with a “B.”

The linchpin supporting the recently adopted budget was their decision to postpone $9 billion in payments for teachers’ pensions due in the next few years.  Delaying the payments ultimately increases their cost to $27 billion.  So much for  Lamont’s self-proclaimed “debt diet” for Connecticut.

Numbers this large are hard to comprehend, so let’s take it to a human scale.  Several UConn current and former employees are eligible to collect a pension well into the six-figures.  With less than one-third of the cost for government employee pensions put aside, at least $100,000 will be needed every year to pay for one pension.  In other words, 30 students’ entire $16,000 annual tuition for four years will be spent on just one pension over 20 years – instead of invested in engineering, computer science and other areas that would strengthen our state’s educational system and provide students with a job after graduation.

In the private sector, employers and employees are required by law to put aside enough money each year to pay for benefits.  In government, politicians and union leaders hold themselves to a far different standard.  For years, they permitted themselves to promise state employees and teachers benefits much richer than private sector benefits without requiring workers or the state to put aside enough money to pay for them.

Massive increases in pension costs have led to lower quality of life, a less competitive workforce and higher taxes.  Our roads that once speedily connected our cities and towns are clogged with traffic and our trains to New York City are slower than they were in 1970.  Our once superior workforce increasingly fails to offer employers sufficient workers with high demand skills.  Tax increase after tax increase has raised the burden of state and local taxes from one of the lowest in the region to the second highest in the entire country.

Residents and businesses are voting with their feet.  From 1990 to 2015, Connecticut lost nearly $13 billion in net adjusted gross income from residents leaving to other states.  In the single year of 2016, Connecticut lost $2.6 billion.  At that rate, Connecticut would lose 30 percent of its income in a mere 20 years.

Losses are poised to accelerate.  The cap on federal tax deductibility for state and local taxes has deepened the bite of Connecticut’s high income and property taxes.  Recent steep declines in Connecticut home values portend faster losses.

Famed investor Warren Buffet advises companies to avoid states with big unfunded liabilities, warning that they are likely to raise taxes repeatedly.  Buffet cautioned against investment in Connecticut and Illinois.  Rising taxes, a shortage of skilled workers and enormous unfunded pensions pushed GE out of Connecticut.  The same toxic combination likely played a role in driving out United Technologies, despite their public statements.

We find ourselves here as the consequence of corruption at the heart of our political system.  Government employee unions are the only groups in Connecticut that automatically deduct dues from worker paychecks and deposit them directly into their own bank accounts.  Government unions use these dues to support candidates that will take care of them when elected.

Government employee unions’ power has become so pervasive that the Speaker of the House is a full-time employee of a government employee union.  Unions have used their power to make Connecticut one of only four states in the country that grant unions the power to collectively bargain for state employee benefits.  Government unions negotiate their benefits with a governor they helped elect and have them approved by a legislature led by their own member.

Teachers’ pensions are negotiated in cities and towns, but their cost is borne by the state.  This unusual arrangement was designed by Connecticut politicians to allow their allies in major cities to promise benefits to their teacher union supporters far in excess of what those cities could afford.  Hartford would have gone bankrupt from excessive municipal employee pensions but for a state bailout.

Neighboring Rhode Island provides a cautionary tale about the value of IOU’s for government benefits.  One Rhode Island city filed for bankruptcy collapsing under the weight of pension obligations.  The court imposed major reductions in pensions.  Another Rhode Island town reduced benefits to avoid bankruptcy.  The courts affirmed those reductions despite finding the U.S. Constitution protects those benefits.

This is the season of graduations, including for my oldest daughter from high school.  Let’s come together and agree to a settlement for our unfunded pensions that provides retirement security for our government employees and teachers, fairness for our taxpayers and opportunity for our children to realize their dreams and our families to stay together in Connecticut.


David Stemerman is a businessman and former Republican candidate for governor.  This op-ed originally appeared on CTViewpoints.org.


4 responses to “Opinion: Borrowing from our children”

  1. Piberman

    Unfunded pension liabilities are the gift of CT Republican and Democrat Administrations going back decades. By most accounts will remain in place for future generations. The original sin was hoisting teacher pensions not on the local 169 towns and cities but upon the entire State and then walking away.
    Fundamentally the problem is maintaining a part time Legislature whose members typically focus their energies well beyond their “official duties”. So far there’s no enthusiasm for a full time Legisalture whose members are not only well funded but enjoy funding for professional staffing. As long as CT elects its Governors who self finance their campaigns we know our future.

    Imagine if Norwalk property owners had to finance their local teacher pensions from City funds. Rather than foisting the outlay on the State. Most likely our local teacher pensions would be far more modest than currently. So we have an attractive system. Foisting teacher pensions to the State and having the State borrow indefinitely for funds that will never be paid.

  2. Concerned

    We aren’t borrowing from our children now. The problem is that the people running the state for the 50 years prior to now borrowed from future generations, and we’re trying to decide how much we should try to pay back versus the next generation. When, as Mr. Stemerman noted, we had tax rates “among the lowest in the region”, that was a result of negligence. The rates should have been higher, the state was just building up huge unfunded liabilities, and they knew it but conveniently ignored it until lenders required them to actually start funding in 2008.

    The Malloy and Lamont administrations have been attempting to rectify this negligence by gradually paying back the liabilities. These are the first administrations that are actually trying to do the right thing (because they were forced to by lenders), and they are being repeatedly castigated for it by a public that doesn’t understand the extent of the bind the last governors put us in.

    There are some common sense things that should probably be done to rectify the situation – there’s no reason healthy, able people should be retiring on a full pension before the age of 65 – but I don’t think that it’s fair to conclude that the problem is the pension system as a whole. The real issue is, don’t let our government get away with borrowing from the future endlessly while an uneducated public blithely enjoys low tax rates today. Hey – that sounds like something that Trump’s doing, doesn’t it?

  3. Pros & Cons

    Any discussion of CT teacher pensions should include a reminder that years ago CT opted not to have teacher participate in Social Security. While the number is dwindling, some retired teachers are not eligible to get Medicare and any SS benefits from other employment are significantly reduced because of the Government Pension Offset (GPO) and Windfalls Elimination Provision (WEP). All pensions are not the same – details matter.

  4. Non Partisan


    I understand the bind previous administrations put us in.

    I also fully recognize that Malloy made it infinitely worse with the deal he cut with the unions that tied future administrations hands.

    And now the the administration is digging the hole deeper with attempts to expand Medicare enrollments, expand our sanctuary state policies, and still not change pension plans, and the funding rates.

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