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State Policies Block Prosperity

High Quality of Life, Needs More Economic Opportunities

By HEATH FAHLE

August 23, 2013

In many ways, Connecticut is a great place to live. The state is one of the best educated, healthiest and wealthiest in the country. A two-hour drive can take us to five of the eight Ivy League colleges, four of the top 25 museums in the United States, four of the 18 hospitals on U.S. News & World Report's honor roll of best hospitals and at least eight professional sports teams that won national championships in the last 10 years.

From art to culture, entertainment, sports, nature and history, Connecticut offers a quality of life that is unmatched by almost any other state. Indeed, a recent ranking of quality of life by the Social Science Research Council named Connecticut's the best in the nation.

But recent evidence leaves little doubt that the economic opportunities necessary to enjoy this quality of life are disappearing.

The Yankee Institute and others have pointed to the state's troubling list of lasts from recent years. According to the federal Bureau of Economic Analysis, Connecticut's economic performance was the worst in the nation last year. Taxpayers bear one of the heaviest per capita tax burdens in the nation while the growth of state government spending outpaces population growth, median income growth, inflation and economic growth.

The state's debts are, on a per capita basis, the highest in the nation. Residential electricity prices are the third highest in the United States and nearly double the national average. Seventy three percent of Connecticut's roads are in poor or mediocre condition, tied with Illinois for the worst in the nation. Most depressingly, despite living in one of the richest states in the nation, one in five residents are on Medicaid for health care coverage, costing taxpayers more than $5.5 billion annually.

Unlike many of the state's advantages, the ills are not intrinsic. History and common sense suggest that the state's problems are unintended consequences of poor public policy that can be fixed.

For example, elected officials in Hartford raised taxes by $1.5 billion to close the recent budget deficit but then proposed spending increases of 4.8 percent and 10 percent over the past two biennial budgets. This continues a trend stemming from at least 1970, during which inflation-adjusted state spending nearly tripled. A different approach would focus on redesigning and reinventing government to provide comparable public services at a lower overall cost.

The prospect of even higher taxes looms. Chronic under funding of the state's retirement system for public employees left the state with the second worst funded pension system in the nation, according to Moody's Investor Services. This debt is estimated to total $50,900 on a per capita basis. High debt today suggests higher taxes tomorrow. Lawmakers in Rhode Island tackled a very similar problem in 2011 by moving public employees to 401(k)-type retirement plans as are available to most private sector workers. Connecticut can and should follow their lead.

The state's energy policy offers another example. The unintended consequences of regulations are higher costs. According to the most recent statistics from the federal Department of Energy, Connecticut residents paid the third highest rate in the nation for electricity, nearly double the national average and almost triple the lowest rates in the country. Reforming energy regulations, ensuring the reliable supply and expanding the use of natural gas in the state, and ultimately increasing the amount of energy generated in the state are the keys to driving down costs.

The CT Mirror reported that $1.27 billion has been siphoned from the Special Transportation Fund and diverted to general bureaucracy over the last 10 years. The American Society of Civil Engineers 2013 Scorecard on America's Infrastructure demonstrates the cost of this misguided policy. Connecticut drivers pay an extra $847 million a year, or $297 per driver, in vehicle repairs and operating costs. A recent Yankee Institute study suggests those same drivers lose an additional $338 per person due to traffic congestion on the state's highways. Replacing the state's highest-in-the-nation gas tax with electronically collected, dynamically priced tolls and then actually spending transportation funds on transportation projects are possible remedies.