Education Reform and Teachers' Pensions Addressed at Non-Profit's State Budget Forum

Speaking at Connecticut Voices for Children's State Budget Forum Benjamin Barnes, the state's secretary of the Office of Policy and Management, said that the state needs to continue to pay attention to the Teachers' Retirement System. "It's propped up by pension obligation bonds, but it's by no means as shored up as it should be," he said.

At a state budget forum sponsored by her organization Jan. 12, Jamey Bell, the Executive Director of Connecticut Voices for Children, said that Connecticut was almost alone - out of 50 states - last year in taking a balanced approach to difficult economic circumstances. She commended the state for coming up with a solution that included cuts and revenue raising measures, giving policymakers some breathing room to take stock this year.

Benjamin Barnes, the state's secretary of the Office of Policy and Management and one of seven speakers at the forum, responded that the state may have breathing room compared to last year, "but not by any normal stretch of the imagination." He added, "There are still lots of issues we need to confront, including education and health care reform as well as reinventing how state government operates and delivers services."

Education issues

"This is the year that we will begin to confront issues facing public education," said Barnes, who co-chairs the state's Education Cost Sharing Task Force. He clarified that he was referring not only to the funding of education. "It's about money, it's about reform," he said.

When asked by an audience member what he sees as the biggest hurdle the state faces for this "year of education," as Governor Malloy has named it, Barnes responded, "Resistance to change. There are money problems we need to confront and education reform matters. On any of the items that are there, the issue is getting the state of Connecticut, its people, legislature, and educators to keep an open mind about doing things a little differently."

Barnes added that the state needs to continue to address the long-term fiscal challenges it confronts, including pensions. The State Employees Retirement System remains severely underfunded. Barnes explained that if the state "starts making more reasonable payments today, it won't face apocalyptic problems in the future."

He added that the state needs to continue to pay attention to the Teachers' Retirement System as well. "It's propped up by pension obligation bonds, but it's by no means as shored up as it should be," he said.

Closing the federal deficit

Joan Huffer, director of the Federal Budget Initiative at the Center on Budget and Policy Priorities, indicated that the federal government has its own severe long term fiscal challenges to confront. She said that the federal government is in a full-throated debate over the federal deficit.

"The federal deficit is a serious problem," she said, but "the public doesn't really understand the issue." It's not the recent recession causing the trouble; the problem is due to the growth of the deficit over time.

"We need to reduce the deficit to be sustainable," Huffer said. "We need to get it down to 2.5-3% of the Gross Domestic Product. To do that we need to find 14 trillion over the next 10 years."

Huffer said that the only way the deficit will be reduced is if Congress comes together and agrees to make hard choices about spending and revenue. Some cuts proposed by members of Congress would hurt state and federal programs highly valued by Connecticut residents.

"It's very important that Congress takes a balanced approach, that everything is on the table," she said. She added that revenue has to be part of the solution and that Congress needs to look at current loopholes and exceptions.

Congresswoman Rosa DeLauro said, "I am for reducing the deficit, but why do the biggest companies not pay their fair share of taxes? Why are we laying off school teachers, why are we cutting off resources to kids? I'm for deficit reduction - let's take a look at some other places."

Corporate tax reform

Matthew Gardner, executive director of the Institute on Taxation and Economic Policy in Washington, D.C., said that Connecticut passed the most progressive economic reform package of any state last year. "What was absent was meaningful corporate tax reform," he said.

The biggest and most profitable fortune 500 companies, including Connecticut's General Electric, are finding ways to pay no state corporate income tax at all, sometimes even receiving rebates, Gardner said.

"It's not a story about corporations versus the rest of us," he added. "It's about a tax system that benefits some corporations and not others. It gives an artificial benefit to some companies, which is antithetical to a free economy and competition."

Gardner said that plenty of companies are paying their fair share. It's mom and pop stores that suffer when they have to compete with large, multi-state corporations that are creating their own tax loopholes.

An analysis by Connecticut Voices for Children found that over the last 20 years, state revenues from the income tax have risen as a proportion of personal income, while revenues from general sales and corporation business taxes (CBT) have fallen markedly. As a proportion of personal income, sales tax and CBT receipts dropped 44% and 73%, respectively, between 1990 and 2010.

The organization writes that this change is likely due to a shift towards a service, rather than a goods-based (and sales taxed), economy and a combination of CBT cuts and tax avoidance by businesses.

An analysis by the Institute on Taxation and Economic Policy also found that, even after Connecticut's 2011 tax reforms, the wealthiest 1% of state residents will still pay only half as much of their income in state and local taxes as the poor and middle class.

Click here for more analysis from Connecticut Voices for Children.