Wow. Now that was a week that puts a sharper edge to the old saw that ‘the devil is in the details’.
Consider:
• State Treasurer Denise Nappier and Senate Minority Leader Lawrence Cafero engaged in their latest round of verbal sparring. Nappier announced she plans to sell off $427.8 million of pension assets to pay benefit claims. Cafero pounced, suggesting it is a sign that the sky is falling and that Nappier and the state are engaged in some bad practices. Nappier shot back that the sale was business as usual.
Now, this odd couple clearly needs a trip to see Dr. Phil. They’re both at least mostly right and they both know it. The posturing is both unseemly and tiresome. But it does shed light on important details.
Both agree that the pensions are grossly underfunded. Both know selling off the seed corn is the road to ruin but only Cafero can say it. Nappier is correct in pointing to asset selloffs as common, but that doesn’t make it right. We all go into principal occasionally and we know we shouldn’t. When it becomes a routine, that’s when there’s a problem.
Score this round a draw. The next round shouldn’t be far behind.
• Then along comes the legislature with a dizzy scheme to make the nanny state responsible for ensuring everybody’s happy retirement.
Sure, let’s invite everybody without a pension plan to jump into the failing state plan.
The scheme is wrapped in concern for the poor souls without a gold-plated union-negotiated pension. Somebody actually noticed those are nearing extinction and thought the state should intervene. Bad idea.
Maybe there’s an argument here that fresh money will fend off insolvency a few years. But that would seem to make the idea more of a Ponzi scheme than a retirement plan.
How can you trust the legislature not to toy with the rules or raid these accounts, just as it did to help bring the state employee pension plans to today’s sorry state?
The legislature needs to get a clue and stay out of competition with private enterprise and out of guaranteeing outcomes. It’s a losing proposition in so many ways.
• Still, the cautionary tale of the week involves the Securities and Exchange Commission suing the city of Harrisburg. Seems the capital city of Pennsylvania has been busily singing happy songs to residents and those buying its bonds while the city circled the bankruptcy drain.
Not fair, the SEC charges. Governments have the obligation to tell the truth to stakeholders or face legal consequences. And the truth in Harrisburg is that it made an awful decision to build a $300 million trash incinerator that never is going to pay its way, dragging the whole city’s budget down with it.
Gulp. Now that’s quite a shot across the bow of governments. Anybody see a common thread here that should have all Connecticut elected officials waking up screaming?
Yes, the devil is in the details and the devil has played havoc with the details of Connecticut’s finances on a number of levels. The clock is ticking and the day of reckoning is coming. It’s just not clear whether it will be when Napier sells off the last pension assets, when the SEC comes calling or when aroused voters demand regime change.
