Connecticut Is Circling The Drain Financially

This is just part and parcel with the threads about paying public officials in Illinois.

But despite all its wealth, Connecticut is almost in worse fiscal shape than Puerto Rico. Let that one sink in for a minute.

A state that ranks as one of the wealthiest in the nation ... is in worse fiscal shape than Puerto Rico. Why? It is nearly $75B in debt. For a state the size of Connecticut, that's a lot!

That's just the overall state. Look internally. It gets worse.

They can't pass a budget.

Lawmakers, who have been bickering with Gov. Dannel Malloy for months over how to clean this mess up, missed a July 1 deadline to pass the state’s $40 billion budget. There are currently four different proposals circulating, and Malloy predicted there won’t be an agreement until September or October.

At that point, the state will likely be operating with a deficit that could climb to $5 billion over the next two years.

Not one that won't run up way more in new debt anyhow.

Hartford is contemplating bankruptcy, and the four major cities, including Hartford, owe a combined total of $4.8B in retirement benefits payouts.

But with no budget in sight, Hartford, a microcosm of the state’s troubles, is contemplating bankruptcy. The state’s four major cities, Hartford, Waterbury, New Haven, and Bridgeport, have accumulated a combined $4.8 billion in retirement benefit obligations and may need future intervention from the state to handle its debts.

And how is the state going to handle bailing them out when the state itself may need bailing out?

And why is this? It's the same old story. Politicians can't be wise with the money.

“A lot of what is going on now could have been predicted 30 years ago,” said state Comptroller Kevin Lembo. “Revenue was flowing into state coffers but politicians never did the hard work to make sure the retirement system was funded. They did the opposite and had them underfunded.”

For 80 years the state failed to properly save for the cost of pensions promised to its public employees and teachers. Its spendthrift decisions led then-Gov. Lowell Weicker to enact a state income tax in 1991.

Soon buckets of revenues from the new tax and from the state’s passage of legalized casino gambling began to flow into state coffers. State’s leaders went on a spending spree.

And the results, while predictable, were inevitable because you can't bilk math. Numbers do what they'll do, and when you don't pay attention and kick the can down the road betting someone else will have to deal with your mess, the mess eventually comes home in a big way. Now as rich as Connecticut is, they can't handle the mess.

The Daily Beast article somewhat plays it down, but the chief driving factor for this unfolding disaster is the public employees’ guaranteed pension and benefits funds. The same as we’ve seen in Chicago and other major cities, promises were made during times of high employment and revenue with no foresight as to what the long term costs would be when all of those public servants aged out of the workforce and continued to live on for decades, being augmented by ever larger armies of workers. As is the case with government at every level, the unions negotiated sweet deals with nobody putting any thought into arguing on behalf of the taxpayer from the other side of the table. Now the bill has come due and even in a state as prosperous as Connecticut has been, the revenue stream is never enough to feed the beast.

So let's see how many dominoes are getting ready to fall ... Illinois, Connecticut, California ... and what about the cities? How many of them are just about ready to call it quits on their debt too? We've already watched it happen in Michigan with the Detroit area.

All falling down going boom.

Government bankruptcies will expose more corruption than anyone can ever imagine.

Massachusetts just recently legalized recreational marijuana use, but it doesn't go into effect until July 2018. Connecticut's fiscal savior would be to embrace the same mindset.

Politics is easy!!

Link

a reply to: eisegesis

You are assuming they use the new revenue wisely if they do it.

Any bets on which state will fall first?

a reply to: Bluntone22

Illinois seems the wobbliest unless there is a disaster. A huge earthquake might put Cali over the edge even with Federal aid.

One by one they do down. Eventually, it'll be the whole damned republic.

a reply to: ketsuko

The only thing I know Connecticut for is a corrupt CPS system.

Yes, think most states overthink in good times and fail to prepare for the bad. But hey, the gov can do it why not the states.

a reply to: ketsuko


So if this does happen, what happens to all those peoples retirement funds, do they just say bad luck moneys gone suck it up ?

Cut the penions cut the benefits.

End the quid quo pro deals for buddies.

originally posted by: hopenotfeariswhatweneed
a reply to: ketsuko


So if this does happen, what happens to all those peoples retirement funds, do they just say bad luck moneys gone suck it up ?

That's basically what happened to the company people when the Big Three automakers went under the government bailed them out.

If you were a company man on a pension, you were cut out and lost your retirement. The government did work hard to make sure the union pensions were preserved though.

So if a private sector worker is going to be stripped of everything after working just as hard as anyone else, then I fail to see why government and union workers should be special.

originally posted by: hopenotfeariswhatweneed
a reply to: ketsuko


So if this does happen, what happens to all those peoples retirement funds, do they just say bad luck moneys gone suck it up ?

When Detroit when bankrupt, retirees pensions were cut, and healthcare was taken away.
They were thrown onto Obamacare, unless they were Medicare age.

originally posted by: DontTreadOnMe

originally posted by: hopenotfeariswhatweneed
a reply to: ketsuko


So if this does happen, what happens to all those peoples retirement funds, do they just say bad luck moneys gone suck it up ?

When Detroit when bankrupt, retirees pensions were cut, and healthcare was taken away.
They were thrown onto Obamacare, unless they were Medicare age.

I sympathize with retirees. It's not their fault they were lied to, but at the same time, it's not our fault they were lied to either.

I wish the people who lied could be truly held accountable because it's a situation that's not fair to anyone, and it's why you should be saving for yourself as much as you can rather than relying on someone else to do it for you.

a reply to: ketsuko

In Detroit, much of the debt was due to medical costs...almost as if Detroit had not been paying their share to BCBS and other insurers for months and years.
There was a Grand Bargain struck.....I don't think residents are paying for the city's corruption.

And as for individual saving.....almost impossible to do these days when healthcare is sooooo damn expensive.

a reply to: DontTreadOnMe

I know.

It's also very hard with interest rates so low. You have to risk it on the stock market to make any gains instead of settling some of it in safer places where it would appreciate interest quietly.

But this is part of the killing of the middle class. They don't want people to be able to be responsible for themselves. Dependency is the key to power. The problem is that those in power aren't wise in their stewardship and create disasters that they may not suffer but a bunch of the rest of us do.

a reply to: ketsuko


That is atrocious , heads should be rolling for these mistakes . That's if they are mistakes, I suspect that the funds have been filtered away through greed and theft rather than mismanagement .

originally posted by: hopenotfeariswhatweneed
a reply to: ketsuko


That is atrocious , heads should be rolling for these mistakes . That's if they are mistakes, I suspect that the funds have been filtered away through greed and theft rather than mismanagement .

Not necessarily.

What they do is make projections based on hoped for performance. So the fund manager says, "We are going to realize a 7% increase this year." And all the benefit letters are written based solely on projections, not real performance, so some years, there may actually be a 7% increase. A few years may see more than that even, very, very good years, but it's far more likely for the projection to fall short.

But the promises are made based on the projection, not the reality. So the shortfall never gets addressed, and the retirees expect to be paid based on a fund that never performed quite as well as they were told it did.

And often, government and union pension and retirement funds operate with no to very little employee contribution, so there is no actual money from the employee being set aside to boot.

a reply to: ketsuko

There was a thread a few weeks ago that discusses about how Illinois is going downhill financially. I wonder if this is the sign that an economic collapse is inevitable?

And Malloy said after his governorship is over, he is moving to Florida where there is no income tax...can't believe he got re elected

a reply to: starwarsisreal

Unless these little catastrophes are strung out, I'd say it's going to get uglier before it gets better especially if Washington tries to bail them out.

I wonder if living in a more fiscally responsible state will be enough cover to allow some chance at survival.