Hartford Business Journal

20 Hartford Business Journal • February 8, 2016 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL GE's departure may be CT's saving grace G eneral Electric's decision to move its headquarters out of Connecticut was viewed as a crisis by many, signaling the state's continued demise as a place to do business. In reality, GE's move could be Connecticut's saving grace. Yes, losing a cor- porate headquarters bruises our state's ego and will cost us at least a few hundred jobs. But it may have provided the necessary tipping point pushing legislators to truly reform state government, or at least curb their insatiable spending habits that have forced two record-breaking tax increases in the last six years. Last week, Gov. Dannel P. Malloy proposed a revised $19.87 billion budget for fiscal 2017, which included nearly $570 million in cuts to the general fund. Reductions are being proposed to sacred cows such as municipal aid and state-employee ranks. There was also minor business tax relief with the elimination of the personal property tax for companies with less than $10,000 worth of property. Just as important, Malloy has pitched structural reforms, like the adoption of zero-based budgeting that matches spend- ing increases to economic growth rates rather than what lawmakers hope to be able to spend (currently the budget assumes 5 percent annual growth in expenditures). He also asked lawmakers to join him in addressing Connecticut's unfunded-pension obligations, which stand to cost the state bil- lions of dollars more annually in the future, potentially blowing a devastating hole in the budget. Malloy, state Comptroller Kevin Lembo, and state Treasurer Denise Nappier have all pitched pension-reform blueprints. We urge all three to develop a plan that can garner labor-union and legislative sup- port. The sooner Connecticut tames this ticking time bomb, the better. Malloy has finally proposed a budget that begins to reflect our true economic realities. For that, we give him credit. But that doesn't mean we're fully on board with the plan. In a major policy shift, Malloy wants to change the way state agencies are funded, providing them block grants instead of line-item funding that appropriates specific dollar amounts for personnel, operating expenses, contractual costs, etc. The change would give agency heads — all Malloy appointees — more latitude in determining how their funding is spent, a job usu- ally left to the state legislature. We worry this gives the executive branch too much power and provides cover to lawmakers unwilling to make tough budget decisions in an election year. Democratic legislative leaders must also incorporate structural reforms pitched by Republicans, including adopting a constitutional spending cap with teeth (which Malloy supports), requiring legislative approval for state-labor contracts, and removing pensions from collective bargaining. Lawmakers can no longer be handcuffed by a budget oversaturated with fixed costs, the largest being personnel expenditures that account for nearly 40 percent of spend- ing (including state employee salaries and benefits). We don't want to eliminate state employees' collective-bargaining power, but we can't let them dictate spending priori- ties to the detriment of all other taxpayers either. Now the onus is on the legislature to respond to Malloy's blueprint. We expect there to be pushback, but lawmakers must pursue aggressive spending cuts and structural bud- get reforms. To resist them, would leave the state vulnerable to other GE-like departures. The business community is watching. n RULE OF LAW DCF a good place to start reforming state gov't By John Horak I n Sept. 2015 a civil-rights lawsuit was filed against the commissioner of the Depart- ment of Children and Families and four others. The suit was brought by foster par- ents who were falsely accused of child sexual abuse — in a setting reminiscent of the hys- teria that led to the Salem witch trials. The criminal case that followed DCF's charges resulted in a rapid acquittal of one parent and dropped charges as to the other. The presiding judge in the criminal proceedings noted (I paraphrase from the suit) that the DCF resisted court-ordered document production, refused to comply with reasonable subpoenas, withheld records containing "extraordinarily exculpatory evidence," and that "the brigade of social workers, educators, department of fam- ily's personnel who provided intense services" never saw any signs of physical abuse. I am discussing this case because it is one indication among many that this large agency, whose brigade of social workers possesses the intimidating power of the government (to remove children and bring charges), is not suit- ed for the delicate clinical task of mending bro- ken children and families. The job requires the therapeutic equivalent of a skilled surgeon with a finely honed scalpel who can work through the gut level emotional trauma of these cases. The government is too powerful and blunt an instrument to do the task well — which leads to the circumstances and results discussed in this editorial. My argument: Major structural reforms are needed to fix the state's fiscal mess and the DCF is a good place to start. The state could reduce costs and achieve bet- ter results if the person-to-person therapeutic counseling and similar tasks were delegated to community nonprofit associations under a competitive-contracting system with program- matic flexibility and accountability. The DCF would be responsible for funding, licensure and administrative functions. First, there were families and children in Connecticut before the DCF was created in 1969, and in that era these problems were large- ly addressed by nonprofit associations if not by extended family. However, the 1960s were domi- nated by the "Great Society" movement's good faith belief that government could, with enough money and the right agencies, ameliorate if not resolve social ills — which spawned the DCF. Several Connecticut nonprofits pre-date the DCF by decades, but since 1969 they have been assimilated into the DCF's strict command and control system. I am advocating a pendulum swing to a modified version of the previous model — in which the DCF and the nonprofits would each have a vital and complementary role. Second, a bird's eye overview of the DCF's long-term performance demonstrates what happens when government (inevitably driv- en by politics) takes on tasks for which it is not suited. The DCF has 3,200 employees (it would be the state's 21st largest employer on the Hartford Business Journal's 2015 list), an operating budget of $807 million (enough to buy 2.25 Boeing 747s each year), and a case load of 36,000 children and 16,000 families ($50,000 per child). I am not trying to be glib, and offer these cost comparisons simply to make it easier to wrap our minds around the scale of the DCF's operations. Nevertheless, despite the considerable expenditure of resources, the DCF has noted (on its website) that it has been "outmatched by the scope of child maltreatment in Con- necticut." This is troublesome because the state's population was 3 million in 1969, and is 3.6 million today. Given the relatively mod- est increase in population over 45 years and the DCF's expenditures during the same peri- od, the complaint about being overmatched appears to be an admission of failure. An ironic possibility is that the DCF is out- matched because its efforts have unwittingly created a self-perpetuating client base — man- ifest in multiple generations being raised under DCF supervision. The DCF's 2013 strategic plan recognized the need to "assist families with multi-generational DCF involvement." The state's 2013 Child Fatality Review report noted that 62.5 percent of the mothers of the deceased children named in the report "had a history of DCF involvement" as children. Has the government's intervention in family mat- ters brought us a business model in which fail- ure brings more work in the door? Another disqui- eting indicator is an apparent gap between perception and real- ity. The DCF's 2015 preliminary Foster Home Quality and Satisfaction survey states that overall "both foster parents and children placed in their homes dem - onstrated a relatively high satisfaction rate (85 percent) among foster children and (79 percent) among their caregivers … suggesting the DCF is successful in providing high-quality services." In contrast, the 2015 civil-rights suit said one of the foster children made remarks that starts as follows: "[W]hen I was a son of the state, in DCF custody, I felt like a piece of raw scrap meat that was brushed into the trash." Perhaps the truth is somewhere in the middle, but I suspect that the stark contrast reflects the DCF's need to assure legislators that money is being well spent — and given DCF's enormous power I have to wonder if the responses to the DCF's survey questions are as candid as good practice requires. In closing, the principle behind my sug- gestion is simple — assign tasks to the people best suited to fulfill them. Of course, those who make their living in service to the complexity of the status quo won't see it that way. n John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. His opinions are his own. HARTFORDBUSINESS.COM POLL Will Gov. Malloy's $19.87 billion budget plan help or hurt CT's economy? ● Help ● Hurt ● Minimal Impact To vote, go online to HartfordBusiness.com. Last week's poll results: Will the legislature raise new revenues to balance the budget? 75.4% Yes 24.6% No John Horak ▶ ▶ Has the government's intervention in family matters brought us a business model in which failure brings more work in the door? ▶ ▶ Malloy has finally proposed a budget that begins to reflect our true economic realities. For that we give him credit.

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