Goldrick: Dadakis’ Grim Portrait of State Finances Simply Untrue

Letter to the editor submitted from Sean Goldrick, Dec. 15, 2015

In a recent newspaper column, Ed Dadakis characterized Governor Dannel Malloy’s claim made during his recent appearance in Greenwich that Connecticut “is doing better than (people) think” to be “simply delusional.”

Mr. Dadakis writes that Connecticut is facing “collapsing finances and a ballooning deficit,” that the state is paying “platinum-level benefits for each and every state employee,” and that “under Malloy and the Democrats, Connecticut is sharply on the decline.”  I thought Mr. Dadakis would appreciate knowing some facts.

First, had Mr. Dadakis attended Governor Malloy’s Greenwich speech, he would have heard the governor explain how he had tackled the state’s unfunded pension fund liabilities by creating a third level of beneficiaries who, as the governor put it, “have to work more years for a smaller pension.”  That Tier 3 covers virtually all employees hired by the state beginning in 2011.  So Mr. Dadakis’s assertion that “every state employee” is receiving “platinum-level benefits” is just not true.  Mr. Dadakis would have heard how Governor Malloy has fully funded that third tier’s liabilities, while funding the second tier over 70%.

In fact, Governor Malloy pointed out that he’s the first governor to fully fund the annual required contribution (ARC) to the pension fund every year he’s been in office.  That is something that Republican governors John Rowland and Jodi Rell failed to do.

Further, had he attended Governor Malloy’s talk, Mr. Dadakis would understand that the $252 million deficit that faced the state this year represented just 1.3% of the state’s annual budget of roughly $20 billion.  So, far from the state’s finances “collapsing”, as he claims, the state is experiencing only small deficits relative to the overall budget.  Indeed, this year’s deficit was insignificant compared with the massive $3.7 billion hole that Republican governor Jodi Rell left for Mr. Malloy to deal with when she left office in 2011.

Mr. Dadakis would have learned that the number of state employees today is 500 fewer than when Mr. Malloy took office.  In fact, during the sixteen years that John Rowland and Jodi Rell held the governorship, government sector employment in Connecticut rose by 22,000.  In contrast, in the less than five years that Governor Malloy has been in office, total government employment has contracted by nearly 4,000 positions.  Moreover, under Governor Malloy, Connecticut’s private sector has added over 70,000 jobs.  Indeed, private sector employment has risen year-over-year in every single month that Governor Malloy has been in office.  By contrast, during the entire sixteen years of Rowland-Rell, the private sector added barely 30,000 jobs.

Mr. Dadakis claims that General Electric Corporation might move its headquarters out of Connecticut “not so much over a specific tax provision,” but due to the “disdainful” attitude of Connecticut Democrats, including Governor Malloy, toward business.  Again, let’s consider some facts.

In its 2014 report for the Council on State Taxation (COST), Ernst & Young LLC calculated each state’s total effective business tax rate (“TEBTR”), defined as all taxes on businesses in a state by all levels of government as a ratio of the state’s private sector gross state product (GSP).  Ernst & Young calculated that Connecticut’s effective business tax rate is 3.4%, the second lowest effective business tax rate of any state in the country, bested only by Oregon. By contrast, the rate in Chris Christie’s New Jersey is 50% higher than Connecticut’s.  The study also determined that corporate taxes as a percentage of Connecticut’s total state and municipal taxes is the lowest, by far, of any state in the country.  Corporate taxes comprise just 28.9% of all taxes in Connecticut, well below the national average of 45%.

That Connecticut’s corporate taxes are extremely low should come as no surprise to GE CEO Jeffrey Immelt.  He knows that GE pays no taxes to the state of Connecticut, except a $250 registration fee every other year.

So the facts show that Connecticut’s corporate tax rate is extremely low; that corporate taxes comprise a tiny proportion of all taxes in the state; that Governor Malloy has moved aggressively to reduce future pension liabilities, while fully funding required pension contributions; that under Governor Malloy, state government employment has fallen to the lowest level in fifteen years; and that the private sector is adding jobs at the fastest clip in fifteen years.

So what does one say to those who attempt to deny the facts?  Perhaps, that they’re “simply delusional.”

Sean Goldrick