Budget the Cut

By MICHAEL K. NORRIS

Just out of college and only a few months into my first job, I saw a glossy booklet a prestigious consulting firm used to promote itself and give managerial advice. The book, generically aimed at CEOs, had a chapter called “Downsizing.” The chapter right after that was called “Restaffing: After Downsizing,” which made me wonder: If you’re going to restaff, why would you downsize in the first place? Save trouble! Why tear down when you’re just going to build up again?

I learned later lot of things in business – as well as with government – doesn’t work that way. We get into recession or cost-cutting mode and the shortest of the short term thinking often takes over. We all see it every day with companies announcing deep cuts in R&D, essential support staff, or other valuable resources that saves $1 now but will cost them $5 or more later. 

We also tend to see posturing and silliness when it comes to cutting budgets. That was on display in Hartford this week when Republicans in the General Assembly tried to force legislators to take a 5% pay decrease. I guess the Republican minority was inspired by the empty gesture of Governor Rell, who voluntarily decided to not pay herself for one day this week. Now I’m in favor of leading by example, but not by press release: few in the private sector (especially those making minimum wage and would have to put in more than 70 hours to match her ’sacrifice’) can afford to give up a day’s pay, and more important, plenty of people give up days, weeks, or months of pay involuntarily. 

But back to the proposed 5% decrease: The Republicans tried to engineer a political win-win for themselves rather than doing something real for the 3.5 million people living in this state. With the 5% decrease, they probably would have saved the state $452,000. I know that works out to a generous fourteen cents for every man, woman and child in Connecticut, but it would mean a pay cut of 5% for legislators who work for (at most) $38,689. If non-union managers and agency commissioners work without a day of pay by March 1, as the governor has proposed, the state saves $1 million, or $0.29 per resident.

Even if we were to pretend the GOP was not showboating, we can clearly see that short-term mentality of cutting a little bit of money for a microscopic short-term taxpayer benefit has been used before. Short-term savings have been made before by cutting the education budget and ultimately teacher’s salaries, but why do we have the nerve to later ask why we have trouble hiring or retaining teachers? How do we measure the morale and lower productivity of workers who get a 5% cut or get a forced furlough? 

Whether it is a CEO hanging onto talent with both hands or a mayor pushing for pushing for better city infrastructure, the merits of taking the long view (and avoiding unproductive posturing) in a recession are clearly there. After all, recessions end. How strong we want to be and how well we want everything to work when this one ends is up to us.

Greetings from Washington

By DAN MALLOY

Over the past few days, I have been participating in the United States Conference of Mayors 77th Winter Conference in Washington, D.C.  In addition to meetings with Obama advisor David Axelrod, President Bill Clinton and T. Boone Pickens, I have had a chance to sit down with mayors from cities across the country, from Honolulu to Denver to  Providence to exchange ideas about efforts we have made at home to  mitigate the economic crisis, improve public health, find ways to generate clean energy and protect the environment,  build infrastructure and improve public safety.

One of the main issues discussed during the conference is the American Recovery and Reinvestment Plan released by the House of Representatives this week.  This package is a the first step in a collective effort to create and save millions of jobs and reinvigorate our economy with billions of dollars in economic recovery tax cuts and $550 billion in targeted investments with what the mayors are calling “unprecedented accountability measures” built in.  

The United States Conference of Mayors is in the process of combing through the legislative package to make sure that it addresses our priorities and will provide recovery directly to cities and towns that need it most.  I joined the other mayors to urge Congress to move quickly on President-Elect Barack Obama’s call for a national Economic Recovery Plan to immediately create jobs and make investments in the future economy. 

The conference comes to a close tonight in the eve of the historic Presidential Inauguration, and the streets of Washington are full with people from all over the world, anxious to witness history as Barack Obama takes the oath of office.  As Bill Clinton noted this morning, it is an amazing coincidence that today we celebrate Martin Luther King Jr. and  tomorrow is the inauguration of Barack Obama as the first African-American president of the United States.  

As the Bush Administration comes to a close, I am optimistic that tomorrow will be the beginning of a new era for our country,  that we can being to tackle important challenges, bringing peace at home and abroad, addressing our broken health care system and rebuilding the economy.  As we embark on a new administration, I am hopeful that we will leave behind the divisive rhetoric of the past and finally come together to move this nation forward.

A Step in the Right Direction

By DAN MALLOY

The SustiNet health care proposal, released yesterday by the Universal Health Care Foundation of Connecticut, is an important step in the right direction for our state as we work toward achieving universal health care.

The Universal Health Care Foundation’s proposal would build a new plan from already existing health coverage, allowing state employees, retirees and those already enrolled into SAGA and HUSKY programs into one self insured pool.  The proposal indicates that self employed individuals and those who can not afford their employer sponsored insurance, and even small businesses and municipalities would be free to enter into the pool, ultimately including any employer in the state.  Especially important is that SustiNet focuses on some crucial elements, such as an emphasis on preventative care and a focus on reducing ethnic and racial disparities in health care outcomes.

When I introduced my Every Child Matters proposal in 2006, I can attest to the fact that my policy advisors and I looked to the Universal Health Care Foundation of Connecticut to find a way to cover all of our citizens, and at the very least, our most vulnerable –children. I congratulate the Universal Health Care Foundation for providing the state with a new option that could potentially help Connecticut lead the way in providing the vast majority of residents access to high quality coverage. 

In every city and town in our state, thousands of people are forced to deal with high costs and inadequate coverage, leading to poor health outcomes.   SustiNet is a new and innovative proposal that will prove to be an important body of work, as it will serve as a comprehensive blueprint for our lawmakers as they grapple with the health care needs of Connecticut’s families.

Making Health Care a Priority

By DAN MALLOY

This morning, amid all of the activity and anticipation surrounding the first day of the legislative session and the Governor’s address, I spoke at the Capitol regarding the issue facing almost 600 contracted janitorial and maintenance employees in Connecticut.  Due to the increased cost of health care since the passage of the Connecticut Standard Wage Law, as of January 1, 2009 these hardworking men and women are at risk of losing family and spousal health care coverage.  

The Standard Wage Law currently requires that a 30% surcharge be added on top of the determined wage to cover the costs of employee benefits.  This surcharge for health, welfare and pension benefits, capped at 30% is arbitrary, outdated and discriminates against the lowest wage workers.  These workers, who provide services that we value and rely on, have salaries so low that a mere 30% is inadequate to pay for health benefits. With rapidly increasing health care and benefit costs, it is incumbent upon us to update our current statutes in order to lift this cap, or to create alternatives that allow for reasonable and just benefits for these employees and their families without forcing them to rely on HUSKY or Medicaid. 

To prevent this dangerous termination of benefits for the vulnerable custodial workers under contract with the state, I am urging that we work together to find a solution as soon as possible.  If nothing is done, these low wage workers whose income does not allow them to buy health insurance in the private market will be left without coverage.  When the 321 children covered by employer-paid health care lose their coverage, they can become eligible for HUSKY programs, and while this safety net is crucial for the well-being of these children, the cost to the State for ensuring coverage through their jobs would be hundreds of thousands of dollars less than the cost of transitioning them into state funded coverage.  Since the economic downturn has escalated, we are witnessing massive job loss in Connecticut, and now more than ever, people who have lost their employer-paid health care turn to state funded resources.  As a result, it would be prudent to take every step possible to ensure that people could keep their existing coverage rather than flood an already crowded system.

I have been a long time supporter of reform that will make affordable health care benefits available to all Connecticut citizens, especially our most vulnerable.  In 2006, My Every Child Matters Proposal would have provided resources and created incentives that would have helped expand employer based coverage, expanding the number of business and individuals who have access to existing insurance pools, and help lower income families offset the costs of health care through the use of tax benefits and credits and premium assistance.  As large numbers of children lose their coverage and will be forced to move to our already overtaxed HUSKY plans,  we must find a quick and responsible solution to this problem and make changes that will allow these workers to retain their employer-sponsored benefits.  Immediate attention to this matter will not only save money during these difficult economic times, but will reflect the values and standards upon which the people of Connecticut rely.

Market Moves in 2008 and Beyond

By COLIN WILSON-MURPHY

As we head into 2009, it is imperative to reflect on the happenings of the last twelve months. Two thousand and eight was an abysmal year for those investors with any sort of long bias toward stocks, bonds, real-estate and private equity. Even oil plummeted 54% in 2008, snapping a six-year bull run. For the full year, the broad S&P Index plummeted 38.5%, while the technology-heavy Nasdaq Composite fell 40.5% and the small-stock Russell 2000 was chopped down 34.8%.  

Most recently, the big three automotive manufactures (General Motors, Chrysler and Ford) stared down bankruptcy. The real-estate market witnessed median new home prices decline 11.3% in October, and new housing starts and permits fall to their lowest levels since 1960. Adding more pain to the equity world, the Dow Jones Industrial Average ended 2008 down 33.8%; its worst annual performance since 1931, when the Great Depression was in full swing. Is the worst behind us? 

There was no safe place to hide in 2008, and, in my opinion, the market volatility (the Chicago Board of Trade Volatility Index reached an all time high of 80.86 in November) and the global economic recession we have lived through in 2008 will continue unabated through 2009. In essence, I believe that the worst is not behind us, despite the possibility of a temporary upward market rally in 2009. While I will skip listing all those iconic American institutions that went out of business in 2008 and the reactionary actions taken by the Treasury and Fed, it is worth noting that poor corporate earnings and poor consumer credit will continue to put downward pressure on the markets. 

So where is the silver lining in this sobering message? As I have stated in previous articles, those individuals who consistently practice conservative fiscal habits by refraining from undertaking unsustainable debt will undoubtedly weather the storm. The old adage, “cash is king” will never be more true than in 2009. Recently, John F. Wasik wrote a Bloomberg article entitled “Good, Bad and Ugly Ways to Raise Some Quick Cash”, in which he suggests thoughtful ways all of us can save, raise and use cash as our cushion in 2009. 

Although my near term economic outlook remains gloomy, this too shall pass, and we will all be stronger and wiser when it does.