We will be hearing about pensions, pension reform and how pension liabilities are taking over the state budget during the year, so it might be worth having a look at how things look right now.
Truth is, the Connecticut public pension system is a mess. For many years the state had the habit of balancing the budget by not putting money into the pension fund while giving early retirement incentives to many state workers. This went on for more than a decade, leaving a gaping hole in the system.
To the legislature and Malloy´s credit, the state stopped doing this a few years ago, finally starting to put money back in the fund. The problem is, however, that under the current payment and amortization schedule (let’s pretend we understand we know what that means for a second) the state has to make a huge financial effort to plug that gap, and even more worrisome, we have to set aside more and more money every year.
How much? The figures come from this study from the Comptroller’s office – in 2016 Connecticut’s contribution to its pension fund was about $1.5 billion. This will climb to about $1.8 billion in 2017, $2 billion in 2019 and will keep climbing non-stop all the way to 2032, when it will get close to $4 billion. Adjusting for inflation the numbers get a bit less daunting (up to $2.5 billion), but the problem remains – in a roughly $20 billion budget, the pensions are indeed a problem.
This is not sustainable, so we will be hearing more reform proposals in the coming weeks. Kevin Lembo, the Comptroller, just presented his ( PPT ), giving a good outlook of what we can expect to see. His proposal tweaks the amortization method and extends its schedule (translation: changes how inflation is calculated and adds more years to pay for the liabilities) to change the payment structure. The result would be a payment of $1.5B in 2016, $2B in 2017, $2.15B in 2018 and then remain pretty much flat in nominal terms until 2032 (that is, dropping, inflation-adjusted), where they would drop to $1.5 billion.
If you stopped reading halfway through the previous paragraph, I understand completely: this is not exactly fun. It also is really important for the fiscal health of our state in the long run, so we will try to do our best to explain what is going on. Public pensions might not be our agenda, but they greatly affect the rest of the budget, so we will keep track.
The Connecticut General Assembly is in session, and the budget hearings have begun. With the state facing a deficit north of $570 million in the coming fiscal year, legislators are again scrambling to find ways to balance the budget.
There seems to be very little appetite so far for any kind of tax increases, so Governor Malloy and legislators are talking about cuts – and these cuts are being discussed, right now, at multiple Appropriations Committee hearings at the Capitol. You can find the calendar here; today the committee will hear about higher education. Tomorrow at 4 pm they will host the hearing for human services which may be of most interest to you.
There are two things to bear in mind about the budget revisions proposed by Governor Malloy, one about process, one about where the cuts will fall. Both are important, and deserve some attention.
a. Where are the cuts?
The cuts for fiscal year 2017 add up to $570 million. The departments that are facing the worst cuts are the Department of Social Services ($61 million), Department of Developmental Services ($55 million) and from addiction and mental health services ($71 million).
This by itself would be worrisome, but it goes beyond that. According to the CT Community Nonprofit Alliance´s analysis, 72% of the cuts ($408 million) come from non-profit providers. Consequently, many core services offered by these providers will again face an uphill battle meeting the needs of low-income families in the state with diminishing resources.
The slow economic recovery has left many families behind. The budget is asking them again to bear the brunt of the state fiscal woes.
b. How are the cuts being introduced?
Governor Malloy has decided to consolidate most line items in the budget under a generic “agency operations” heading. After that, his proposal states that spending will be cut 5.75%, but without specifying exactly from where.
This is a problem. Instead of the traditional budget breakdown of proposed reductions with specific explanations of what line items are facing cuts, this proposal just offers an agency-wide spending level, and gives the authority to each agency head to decide where to cut. The result is a budget that imposes harsh spending cuts but is lacking in transparency, with no information on what programs will be eliminated.
This is not acceptable. Transparency is an essential for accountability. The Governor´s budget proposal shifts the responsibility and decision making for crucial spending decisions from an open, public process at the General Assembly towards one with no public participation, no open hearings and limited accountability. The only way to make those decisions and introduce real, needed changes to the state budget is through an open, accountable and transparent budget process, not by delegating authority to the executive branch.
What is next? How can I get involved?
Right now we encourage you to reach out to your legislators, even more so ifthey are on Appropriations. If you are able, we strongly encourage you to submit testimony to the committee, specially if you are involved in a program that is facing cuts. The message is simple:
We should not balance the budget on the backs of those that have not participated in the economic recovery.
We need a transparent budget process, not cuts decided behind closed doors within each agency.
Feel free to give us a call if you have questions or need a hand drafting testimony, setting up a meeting with a legislator or preparing talking points. We will be happy to help.
State Ranks 23rd Overall in Financial Security of Residents; Households of Color Face Huge Uphill Climb
Even though the national unemployment rate has dropped to five percent in recent months, the unemployment and underemployment rates in Connecticut remain stubbornly high, according to a new report from the Corporation for Enterprise Development (CFED).
Indeed, 39% of Connecticut’s households are locked into a “new normal” of perpetual financial insecurity, unable to build the savings needed to last even three months in the event of an emergency. The research, reflected in CFED’s 2016 Assets & Opportunity Scorecard, also found that state policies are doing little to improve the financial security of Connecticut residents.
The situation is most dire for households of color. African-American and Latino households in Connecticut are significantly more likely to live below the federal poverty line compared to white households. Even more startling, new data show that businesses owned by whites in Connecticut are valued almost 15 times higher than businesses owned by African-American residents.
Published annually, the Assets & Opportunity Scorecard offers the most comprehensive look available at Americans’ ability to save and build wealth, stay out of poverty and create a more prosperous future. This year’s Scorecard assesses all 50 states and the District of Columbia on 61 outcome measures spanning five issue areas: Financial Assets & Income, Businesses & Jobs, Housing & Homeownership, Health Care and Education. It also ranks the states on 69 policies that promote financial security. When it comes to outcomes, Vermont ranks at the top of the country overall, while Mississippi ranks last.
Connecticut’s 23rd -place outcome ranking improved slightly from last year’s 27th -place ranking. The state received a “B” in Financial Assets & Income, driven by a low income poverty rate, a high rate of households with savings accounts and a low rate of underbanked households-those which have bank accounts but still use high-cost non-bank alternatives such as payday loans. Unfortunately, the state is one of the worst when it comes to income inequality-the richest 20% of households in Connecticut make 5.1 times as much annually as the poorest 20%. The state received an “F” in Housing & Homeownership due to its high foreclosure rate (3.06%) and its disparities in homeownership by race and income. The homeownership rate for white households in Connecticut is twice that of households of color, and the homeownership rate among households in the top income quintile is 2.8 times higher than for that homeownership rate for households in the bottom income quintile. The state received an “A” in Health Care, due in part to having one of the lowest uninsured rates in the country (8.0%). Connecticut earned an “A” in Education, driven by its second-best rate of early childhood education enrollment (64.6%). Finally, CFED Connecticut earned a “D” in Businesses & Jobs, meaning residents don’t have access to quality job and business opportunities.
The Scorecard also evaluates 69 different policy measures to determine how well states are addressing the challenges facing their residents. Connecticut ranks third overall in policy adoption, having adopted 36 of the 69 policies assessed. It is the third-best state when it comes to Education policies, partly because of its adequate funding for K-12 and postsecondary education. Connecticut ranks 5th in Financial Assets & Income, thanks to its refundable Earned Income Tax Credit, consumer protections for small-dollar lending and legislation that allows financial institutions to operate prize-linked savings accounts. The state ranks slightly lower, but still in the top ten, for Housing & Homeownership policies (7th) and Health Care policies (7th). Connecticut ranks 6th in the area of Businesses & Jobs, having implemented half of assessed policies in this area (5 of 10).
Across the nation, the Scorecard found scant evidence that federal and state governments were willing to embrace policies that would open new doors to greater financial security for those struggling the most in the American economy. Without such commitments, most low-income individuals-particularly people of color-find themselves falling farther behind.
Among the key findings from this year’s Scorecard:
Homeownership rates remain at historic lows, falling to 63.1% for the eighth consecutive year of decline and contributing to crowding and rising costs in the rental market.
Fully 14.3% of adults say there was a time in the past year that they needed to see a doctor but could not because of cost. The statistics are worse for individuals of color with one in four Latino adults and one in five African-American adults saying money concerns prevented them from seeing a doctor.
Although both high school graduation rates (82.3%) and four-year college degree attainment (30.1%) increased from 2013 to 2014, racial disparities remain severe. Less than 20% of AfricanAmerican adults and fewer than 15% of Latino adults hold four-year degrees.
While the national unemployment rate has dropped to 5%, the underemployment rate is twice as high, at 10.8%. What’s more, one-in-four jobs is in a low-wage occupation.
Building up even a small amount of savings is a challenge for almost half the country. Some 44% of households are “liquid asset poor,” meaning they have less than three months of savings to live at the poverty level if they suffer an income loss.
Business ownership among both men and women (21.4% and 17.1% of the labor force, respectively) declined from 2007 to 2012, even as average business value for both groups increased. Yet female-owned businesses still are worth only a third the value of the average male-owned business-$239,486 to $726,141, respectively.
“There certainly are positive signs that the nation’s economy is improving,” noted Andrea Levere, President of CFED. “But there also is very compelling evidence that many households are stuck in a financial hole and are struggling to dig themselves out. State governments can play a critical role in helping them move on to firmer ground and a more prosperous future.”
To read an analysis of key findings from the 2016 Assets & Opportunity Scorecard, click here. To access the complete Scorecard, visit http://scorecard.cfed.org.
Sasha is a young mom who enrolled in Even Start, a program that creates opportunities for vulnerable children and their parents together. Sasha signed up for classes to receive her equivalency diploma, while her newborn, Janelle, was placed in an accredited early care classroom, located in the same adult ed center.
Even Start is a two-generation program, an innovative approach to social services that seeks helping families as a whole, not as separate pieces. We know that helping a mother look for a job, get her GED or enroll in college is not enough if she cannot take care of her kids. We know that educating children in great early care programs is less effective if their parents cannot find a job to provide them with a stable home. Two generation programs strive to help families succeed by providing both children and their caretakers with the supports they need to become successful, instead of having programs working in isolation.
CAHS is helping lead the charge for such innovative “two generation” approaches to break the cycle of poverty by moving children and their parents toward educational success and economic security.
We are doing it because families like Sasha´s cannot wait.
Next year, CAHS and our allies will work to improve and implement two generation programs in Connecticut, helping families become self sufficient. We have done this in the past, with the state Earned Income Tax Credit, and with an early care and education system that has made Connecticut a national leader.
But to make it happen, we need your support. With your help, we can continue to create pathways for a brighter future for Connecticut’s children and families. Your support keeps us working every day-we couldn’t do it without you. Your contribution will empower Connecticut families to thrive. Together, we can ensure that thousands of families achieve their potential and live fuller and happier lives.
Please click here to contribute – or visit our website to learn more about CAHS and send your donation.
On November 17 CAHS was proud to host a very special meeting in our new offices: an event to recognize the contributions of our great CT Money School Volunteers.
CAHS launched the CT Money School in 2009, and since the start the program has relied on the contributions and expertise of hundreds of volunteers willing to share their time, experience and knowledge to help others become self-sufficient. You can learn more about the CT Money school here, or even sign up here if you want to volunteer. For everyone else, here are some photos of the event – you can see the full gallery at CT Money School Facebook page
This new report focuses on an innovative new model to address remedial education for transitional students, those that test at 8th grade or below in their placement test. A set of new programs have brought together community colleges and adult education providers to work together to provide remedial education, using a variety of new strategies that combine support services, personalized instruction, software-based solutions and innovative teaching tools. Ren Brockmeyer and Roger Senserrich, the main authors of the report, were at hand to present the findings (slides on their presentation here).
After discussing the report, a panel with Dr. Steve Minkler, Dean of Academic Affairs at Middlesex, Dr. Diane Clare-Kearney, Director of Manchester Adult and Continuing Education, and Fred Silbermann, Program Facilitator for Meriden Adult Education, joined the authors to discuss their experiences implementing the new programs. Following the panel, the attendees participated in table discussions on how Connecticut can create new pathways to success for non-conventional students.
The main conclusion of both experts and attendees is that the new reform has shown some very promising results where community colleges and adult education providers worked together to deliver remedial classes. Building new partnerships, however, has proved challenging.
Governor Malloy has invited the Democratic and Republican Leadership to meet about a predicted revenue shortfall, but apparently the only options to be discussed are more cuts. We call on the Governor and the legislature to invite fairness to the table by examining ways to achieve a fairer and more efficient revenue system.
Addressing revenue shortfalls with only more cuts is not fair. Continued cuts will negatively affect all of Connecticut’s families and children who need essential services, people with disabilities and the elderly who need caring services, schools that need good teachers, and communities that need public safety. If our revenue projections are off, it is certainly not because the richest half a percent among us are struggling, or because our largest and most profitable businesses can’t afford to pay their share. Let’s seek additional contributions from
those very fortunate few who have ability and means to pay.
We all want a government that works well and programs that provide the essential public structures upon which our economy and communities depend such as clean air and water, good schools, public safety and care for our most vulnerable. We are the richest state in the union, and yet for decades we have tolerated waiting lists in some of our most basic public services, and inadequate investments in our futures. Indeed, over the years, these programs have already
sustained hundreds of millions of dollars in cuts.
When we miss our revenue forecasts by less than 1% — as the Administration is indicating here – the first place we look should not be these important programs. Instead, we should look first at addressing a system where working and middle class families pay almost twice the effective rate in state and local taxes than the richest among us do, and we should ask those richest to pay a little more. And such principles of fairness should apply not just to individual taxes, but to
business taxes as well. Our revenue structure should ask our largest and most profitable businesses to pay their fair share, and we should do so in way that is fair to small businesses and good for our economy.
More cuts mean still more pain for all of us, and threaten the futures of our families and our communities. Let’s not leave fairness off the table. There are better choices.
Better Choices is a statewide coalition working to help lawmakers make smarter decisions about the state’s imbalanced revenue system. Members include nonprofit providers, labor, community, faith, environment, and advocacy organizations.
CAHS and the Coalition on Human needs are releasing a report today on the the new census data, and the potential impact that some upcoming federal cuts can have in low income residents in the state.
In Connecticut, 10.8 percent of people were poor in 2014 – roughly the same as in 2013.
The child poverty rate also remains stuck, with 14.9 percent of Connecticut children living in poverty in 2014 – roughly the same as in 2013, as well.
Poverty in Connecticut disproportionately affects people of color:
Nearly 21 percent of African Americans and 26.5 percent of Latinos in Connecticut are poor. In contrast, poverty for non-Hispanic whites is 6.1 percent.
Nearly 15 percent of Connecticut children are growing up in poverty, and the statistics are worse for children of color: 30.5 percent of African American children and 33.4 percent of Latino children in Connecticut are poor.
The new Census Bureau findings add to the mounting evidence that programs like low-income tax credits, the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps), and subsidized housing reduce poverty now and improve children’s chances of gaining economic security in the future. The Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) lifted 69,000 Connecticut residents, including 35,000 children, out of poverty each year, on average, during 2011 to 2013.
Sequester budget cuts, however, are threatening this safety net:
Congress will cut 1,010 existing housing choice vouchers in Connecticut alone, although today 1 in 4 low income renters in the state pay more than half of their income in rent.
Cuts to the Earned Income Tax Credit and Child Tax Credit could push146,000 Connecticut residents, including 63,000 children, into or deeper into poverty.
You can find more details on the proposed cuts by downloading the full report here.
New Census data released last week confirms something that we all probably knew: unemployment might be down and the economy might be growing, but the benefits are far from reaching everyone.
Poverty and child poverty rates in the state remain unchanged. Although the poverty rate edged up slightly ( from 10.7 in 2013 to 10.8% in 2014) the change is too small to be statistically significant. In layman´s terms, the difference between both numbers is small enough that we can´t say if the drop is really there. Child poverty also went up a bit (from 14.5% to 14.9%) but the change is also too small to be considered statistically significant.
What the data shows, however, is that racial disparities remain stubbornly high. The poverty rate in Connecticut among non-Hispanic Whites is 6.1%; the number climbs to 20.8% for Blacks, and 26.5% for Hispanics. For children, the gap is even wider. Only 5.6% non-Hispanic White Children are poor, compared to 30.5% for Blacks and 33.4% for Latinos. These disparities remain as wide as they were a year ago.
By county, the geographical differences in the state have not changed. Litchfield (7.5%) and Tolland (7.3% ) counties have the lowest poverty rate, while New Haven (13.1%) and Hartford (12.2%) have the highest.
You can access the census data on their website. As usual, CT Voices for Children has an excellent write up.
Besides the disappointing poverty data, the Census release included a very important piece of good news: the Affordable Care Act (ACA) is working really well. The percentage of residents in Connecticut without health insurance dropped from 9.4 to 6.9%. The decrease is statistically significant – close to 90,000 people that did not have insurance last year have it now.
For children the drop is smaller, and not statistically significant, although the starting point was already low: only 3.7% of Connecticut children remain uninsured, down from 4.3% in 2013. Full coverage is within grasp.
The ACA is not just having positive effects in our small, progressive state in the northeast. Nationwide, the uninsured rate has dropped from 14.5% to 11.7% in one year. The decrease will be even steeper with wider Medicaid adoption, but the trend is in the right direction.
As usual, CT Voices have a policy brief covering this issue as well. You can find it here.