Is Vermont headed down Connecticut’s path to bankruptcy?

by John McClaughry

A businessman friend of mine recently moved to Vermont from Connecticut. He explained to me why he got out of Connecticut, and it’s instructive about what happens to  state controlled by an enthusiastic liberal legislature and governor.

First, my friend said, the legislature went after the gun industry, and the industry decamped for Texas and South Carolina. Then the Legislature decided to levy taxes aimed at General Electric, and the entire company decamped for Massachusetts.  Then the Legislature figured it could tap the cash of the insurance industry – and Aetna is decamping for New York .

What you have left are unemployed migrants from El Salvador and Puerto Rico, utterly impoverished, a huge financial drain on a State with a budget deficit of $1.8 Billion and upside-down on its pension obligations and issued debt by over 200% of assets. Basically, Connecticut is a bankrupt State.

The legislature’s latest stunt is axing the transfer payments from the State for the schools. They explained that it can’t be helped, the state is out of cash and cannot pay the bills.

So, would you stick around to pay for that folly? They still build subs down in the General Dynamics shipyard in Groton, and some helicopters at Sikorsky, at least for now. Heaven help the place when the military contracts evaporate. That, he concludes, is the only band-aid left.

Vermonters need to think about that sooner, not later.

– John McClaughry is vice president of the Ethan Allen Institute.

{ 5 comments… read them below or add one }

Jim March 9, 2018 at 10:27 pm

The folks in Montpelier have the “shoot first and ask question later” mentally when it comes to committing funds that do not exist. Get a “feel good” idea? Great let’s do it and find the money later which means added and/or new taxes plus and/or new or increased fees.

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Ted March 10, 2018 at 1:05 am

I hope your friend from CT doesn’t bring what has happened there to VT like those of Mass have done to NH.

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William Hays March 10, 2018 at 4:18 am

It’s hard to keep track, as stats change daily, but isn’t CT now the most highly-taxed state in the country? They can’t even keep their trains running when they have a little snow, like this week. M-NR, and tenant Amtrak, got shut down in CT. Scary.

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Chris Campion March 10, 2018 at 4:57 pm

That same sort of “progressive” leadership has chased out businesses and people from Vermont, with similar impacts, including critical infrastructure in Vermont Yankee. Meaning Vermont’s been upside-down financially for the past couple of decades, with its unfunded liabilities basically acting as the anchor that’ll finally drown out any other spending the state might want to do.

There’s a reason people leave. I think a number of states, like Vermont and Connecticut, are in such bad shape (maybe California too) that they’re the canaries in the coal mine, and there will be some federal effort to prop them up. It’ll be a state bailout, for the things the federal gov’t doesn’t already bail them out for, semi-catastrophically, regarding Medicaid and Medicare.

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Ed Gomeau March 10, 2018 at 7:39 pm

As someone who worked in Connecticut Local government as a Town Manager and Finance Director in five different towns over 38 years, I can’t agree with you more. I watched and tried to warn state officials from the Governor(s) on down, but to no avail. The slow destruction began with no longer being the Insurance Capital of the US, no longer the Brass industry leader and certainly no longer the Submarine Capital of the World as Electric Boat shrunk to a mere shell of its former self (from 25,000 employees to a fraction of that). Connecticut also lost almost all of it’s defense contracts as Senators Dodd and Lieberman fiddled away while Virginia, Florida and other states picked our pockets of defense contracts. If it were not for the Indian Casinos develoopment the financial disaster would have taken place years ago. We moved to Vermont six years ago thinking it was a way out of Disneyland governance. Unfortunately, its presence is here. A lot of states have fiscal problems, but in many cases, they admit it and try to take steps to slow it down. Here in Monpelier, they are delusional. Problems are just ignored as if they don’t exist and everything is wonderful as long as we can throw money at social issues rather than real world problems. State officials continue to insist pension plans funded at 60% or less will be fine and investments will return plans to full funding. As someone who has worked nationally on public pension plan problems, and has had to issue Pension Obligation Bonds to pull out a sinking (sunk) municipal pension plan I can tell you the underfunded plans are not coming back without structural changes in the plan (retirement age, etc) and a much higher contribution level. One positive comparative note though, very few if any schools in Connecticut spend as much per pupil as Vermont does, and most Connecticut schools rank much higher than Vermont’s.

As citizens and tax payers we are victims, of what I call a “propensity to accept mediocrity (or incompetence) ” at all levels of government, local, state and federal.

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