Pensions are “the perfect vehicle for procrastination”

Connecticut voters overwhelmingly approved a constitutional spending cap in 1992, but lawmakers still haven’t defined the three terms in the amendment that would make it work.

Earlier this year, lawmakers created a Spending Cap Commission to recommend definitions. The hope is that lawmakers will adopt them next year.

The commission has already settled on definitions for income and inflation. Both will work well and I hope the General Assembly will adopt them as recommended.

This is what I said to the commission at its Hartford public hearing on Wednesday:

That leaves general budget expenditures. I would encourage you to use the most inclusive definition possible, including pension contributions.

As a technical matter, I don’t think pension liabilities are evidences of indebtedness, which has a specific legal meaning. In particular, if pension liabilities are evidences of indebtedness, they would count toward the statutory bonding cap set at 1.6 times spending.

More generally, excluding pension costs from the cap creates bad incentives. Roger Lowenstein, the author of While America Aged, calls pensions “the perfect vehicle for procrastination.” Excluding pension contributions from the cap will encourage even more procrastination.

If the cap excludes pension contributions other than normal cost, the strategy to increase spending would be to minimize the normal cost estimate and make up for it in later contributions that don’t “count” toward spending.

Excluding pension costs suggests that past commitments don’t have a real impact on the present cost of government. The reality is just the opposite. Past commitments are driving the current cost of government.

The spending cap is written to limit the growth of government without creating the brinksmanship and risk of default associated with the federal debt limit. That was prudent and wise. Excluding recurring spending, pension contributions or otherwise, would be the opposite. Thank you.

The commission will host four more public hearings before Thanksgiving. The next hearing will be Thursday, Oct.13, at Bridgeport City Hall from 4 to 7 p.m. Details about the New Haven, Windham and Waterbury hearings are here.

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