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July 22, 2013
From: The Federation of
Connecticut Taxpayer Organizations
Contact: Susan Kniep, President
Website: http://ctact.org/
Email: fctopresident@aol.com
Telephone: 860-841-8032
What Do the State of Connecticut
and the City of Detroit
Have in Common?
Debt, Lots of Debt, and A Fitch Rating Downgrade!!!
Promises
Made by Public Officials to Public Employee Unions for Unsustainable Pension
and Retiree Healthcare Benefits are Driving some Governments to Bankruptcy as
noted within After
Detroit, Who's Next? “For years Detroit has been gutting services and sucking
taxpayers dry to finance retirement and debt obligations.” The same could be said for Connecticut…..
Connecticut Pays Pensions as High as $276,000!!!!
In Calendar Year, the State of Connecticut paid 44,216
Retirees pensions totaling $1.4 BILLION!!!
The following link illustrates those who received from $50,000 to the
highest pension at $276,364.
http://www.ctact.org\upload\home\StatePensionFinalFinal.xls
To learn more about State of CT Employee Pensions click http://transparency.ct.gov/html/searchPensions.asp.
Connecticut
Among States With Worst Public Pension Deficits « !
****************
With the State of Connecticut mired in debt, we have little
insight into the unfunded liabilities of the State’s 169 individual
towns/cities since 2001 when Waterbury
Aldermen Vote to Ask Connecticut to Take Control of City ... Finances as its debt had resulted in its bond rating being reduced to
junk status. On March 27, 2011, the
Waterbury Republican wrote in an article captioned A
decade of oversight in Waterbury Republican American that “Waterbury Residents are still paying for the financial
meltdown that resulted in a state takeover of the city's finances 10 years ago
this month. “The average taxpayer
devotes almost a quarter of his yearly property taxes, or $1,400 out of $5,855,
to pay for the city's past fiscal sins, a debt that won't disappear until
2039.”
Perhaps it is now time to assess the financial stability of
the 169 towns and cities throughout Connecticut
so that property owners will not fall victim to a fate similar to those in Waterbury.
And the ultimate question is – If Connecticut towns cannot file for bankruptcy,
and our State is mired in debt, then what?
****************************
The Ponzi scheme of Bernard Madoff and the Cook the Books
bad boys of Enron pale in comparison to the crimes perpetuated against
taxpayers throughout the country by past and present elected public officials
in State and municipal governments who have catered to public sector unions and
other special interests while putting public finances at risk!
Crippling States and Municipalities throughout the Country
is Debt Driven by Promises Made which Must be Paid for Public Employee Pensions
and Retiree Healthcare.
The Connecticut Business and Industry Association (CBIA) in
their January, 2013 article captioned Avoiding
a Cliff of Our Own - CBIA notes: The
state’s response to budget deficits over the years has often been to add and/or
increase taxes or fees, while any budget “cuts” have typically just slowed the
rate of spending growth. According to a report published by CBIA this month,
state spending has grown 184% since 1990, easily outpacing growth in inflation,
the state population, and median household income.
The most dramatic spending growth over the last two decades
has occurred in five main areas:
- State employee retiree health benefits—1,395%
- Medicaid—405%
- Debt service (paying off state borrowing)—391%
- The corrections system—253%
- State employee pensions—187%
The September 14,
2012, the Connecticut Policy Institute CPI
white paper on Connecticut's public pension liabilities
notes …. “Connecticut’s
long term pension and healthcare liabilities for its public employees are the
sleeping giant of state policy challenges. “When calculated using private
sector accounting methods, Connecticut has more than $60 billion of unfunded liabilities across the
state’s three main pension benefit funds and its retiree healthcare benefits
fund. When combined with Connecticut’s roughly $20 billion in bonded debt, this
is more than $80 billion of total state debt –nearly
40% of state GDP and the third highest debt per capita in the country.1” The articles continues at the following web
link. http://www.ctpolicyinstitute.org/content/CPI_Pension_Paper.pdf
The demise of Detroit
was no surprise to the Fitch rating agency who sounded the alarm as early as
2005. Following the recent announcement
that Detroit, Michigan is the largest
municipal bankruptcy in the nation's
history with $18 Billion in unpayable debt, Fitch in a July 19th article
captioned BREAKING:
Detroit General Obligation Bonds Unlikely to Be Repaid (Fitch Ratings) noted ….. “This action was not unexpected. “We signaled
concern about Detroit's
long-term prospects and kept the ratings on negative watch or outlook as the
ratings declined steadily since 2005. “On June 14, 2013 Fitch lowered both the
limited tax general obligation (LTGOs) and unlimited tax general obligation
(ULTGOs) to 'C' from 'CC' and 'CCC', respectively, stating that default is
imminent or inevitable, when the emergency manager announced the intention to
default on and/or execute a distressed debt exchange last month.”
On July 3, 2013 in an article captioned Fitch
downgrades CT | HartfordBusiness.com, it
was noted “High debt and fiscal
vulnerability were two factors behind one credit ratings agency's decision this
week to downgrade Connecticut's general obligation bonds. “Fitch Ratings downgraded its outlook on the
state from "stable" to "negative." “Fitch said the state
has "reduced fiscal flexibility at a time of lingering economic and
revenue uncertainty." “The agency said the state's budget delays repayment
of deficit borrowing, adds to the debt load and fails to rebuild a financial
cushion.”
In June, 2012 an AP article captioned Connecticut
Among States With Worst Public Pension Deficits « noted “…what states will owe public retirement in the
decades ahead ballooned to $757 billion…
“The Pew Center on the States found 34 states
failed to maintain safe levels of money in the pension funds, which most
experts agree is about 80 percent of long-term obligations. “Four states– Connecticut, Illinois, Kentucky and Rhode
Island– didn’t even have 55 percent of the money
they’ll need in the long run.” Pews Widening Gap Update: Connecticut notes: Connecticut paid its
full annual pension contribution just three times from 2005 to
2010. The system was 53 percent funded in fiscal year 2010
and faced a $12 billion funding gap. Connecticut
had a retirement plan liability of $71.5
Billion. http://www.pewstates.org/research/state-fact-sheets/widening-gap-update-connecticut-85899399376
The headlines that Detroit Pensions Threatened By Bankruptcy, Retirees
Could Lose Healthcare, Retirement Funds
should be a wakeup call to every public sector union in the country, to include
those in Connecticut. On June 27th the
Federation wrote As State Property Tax Proposed Taxpayers Will Pay 125
Million Dlrs for State Employee Wage Increases ! Click on Salaries and Benefits Paid to State Employees in
Fiscal Year 2012 to see that Connecticut taxpayers
paid $5.8 Billion Dollars to 92,197 State Employees some of whom earned
salaries and benefits well in excess of $200,000 and more.
Public officials have long catered to their voting block,
the public sector unions while putting the public at risk. The article captioned Bankrupt Progressive Socialist
Detroit Succumbs To Failures Of Big Government Notes “Detroit,
however, is dead, and unions and government killed it.” “Labor overhead was an
albatross around Detroit's
neck. “Until recently, total pay and benefits for a full-time worker at the Big
Three averaged $140,000 a year vs. $80,000 for their foreign competitors. “Add
an estimated $2,000-plus per car for retiree health care and pensions for the
Big Three, and you wonder not why Detroit failed, but why it didn't fail
sooner. “Detroit's response to a
declining business climate was more taxes, fewer city services and bloated
pensions for workers in the only growth area — government. “The city's $11
billion in unsecured debt includes $6 billion in health and other retirement
benefits and $3 billion in retiree pensions for its 20,000 city pensioners,
members of the public sector unions that helped bring Detroit to its knees.”
The impact of union contracts was evident in Stockton, CA in
the article captioned Police
Chief's $204,000 Pension Shows How Cities Crashed ... noting “Police Chief Tom Morris was supposed to bring
stability to law enforcement when he was appointed to the job
four years ago. “He lasted eight months and left the now-bankrupt city at age
52 with an annual pension that pays more than $204,000 -- the third of four
chiefs who stayed in the position for less than three years and retired with an
average of 92 percent of their final salaries.”
“Bloomberg News compiled data from the California
Public Employees’ Retirement System for
more than a dozen cities facing the financial strains of rising pension costs
and declining revenue. “The data show how local governments struggle to support
six-figure lifetime benefits for some retirees even as they cut police and fire
services for city residents.”
“San Bernardino, a city of
209,000 about 60 miles (100 kilometers) east of Los
Angeles, is typical of the phenomenon. Its city council voted July
18 to approve an emergency bankruptcy filing, about six years after the panel
unanimously lowered the retirement age for public-safety workers to 50
from 55.”
I addressed this issue in a 2009 article captioned STATES AND TOWNS IN CRISIS - BAILOUT OR BANKRUPTCY. How long
can California and Connecticut taxpayers continue to support
public employee pensions exceeding 200,000 dollars. Susan Kniep - FCTO - June
2009
A reference is made to Zombified Cities which include….
The author notes “There is absolutely no way Chicago, Oakland, Baltimore, Philadelphia, LA, Houston,
and numerous other cities can meet pension obligations without a major
restructuring of promises. “Given that
public unions seldom if ever agree on even the smallest of pension concessions,
expect many of those haircuts to happen in bankruptcy court.” Continue reading at …. http://globaleconomicanalysis.blogspot.com/2013/07/moodys-downgrades-chicago-debt-citing.html
In May, 2013 in an article captioned States
sinking in pension plan debt: Column - USA Today it is noted ….”Taxpayers nationwide are staring down a
swelling tidal wave of government pension debt. “Recent estimates put the
combined unfunded liability of
state pension systems at $2.5 trillion.
“Nearly every state has tried to reduce these unsustainable costs, but most
reforms have proven to be baby steps or worse -- leaving future generations up
to their necks in waves of debt. “One
inescapable fact remains: Without meaningful reform, paying down these liabilities
would cost the average American household an additional $1,385 in taxes every year for the
next three decades.” Continue reading at …. http://www.usatoday.com/story/opinion/2013/05/28/state-pension-bankruptcy-column/2355793/
As a recent REPORT State economy headed for crisis notes “Connecticut's massive long-term debt,
deep pockets of poverty and more than 20 years of stagnant job growth threaten
to sink the state's economy for decades unless major reforms are enacted,
according to a report Wednesday from a
national fiscal responsibility group and the University of Connecticut's
economic think-tank. “Comeback America Initiative founder David M.
Walker and UConn economics Professor Fred V. Carstensen, who outlined their
report at the Hartford Marriott, called for dramatic new reductions on public
worker retirement benefits, deeper investments in transportation, education and
economic marketing, and an enhanced "culture of transparency" that
will drive greater efficiencies in state spending.” Each CT
resident owes more than $50,000 “Though Connecticut has one of the highest
bonded debts, per capita, of any state in the nation, that represents just a
fraction of the crippling debt taxpayers must answer for the in near future,
said Walker, a Bridgeport resident and former U.S. comptroller general under
President Clinton. He launched his Comeback America campaign for fiscal
responsibility in 2010.” Continue
reading at ….. http://www.ctmirror.org/story/report-state-economy-headed-crisis
The Federation notes that past and present State elected
officials have buried Connecticut
taxpayers in unsustainable debt and they continue to do so as evidenced by the
State’s monthly Bond Commission meetings.
The next meeting is scheduled for July 26, 2013 in Room 1E of the Legislative
Office Building in Hartford at 10:30 AM
where millions more $$$$ will be put on the table for a vote. To review
previous 2013 Bond Commission Agendas and Minutes click http://www.ct.gov/opm/cwp/view.asp?a=3010&q=400886.
Connecticut
at Risk: Will the State Navigate to Prosperity?