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20 Hartford Business Journal • February 15, 2016 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL Government can, should act more like business S ome politicians, particularly those who want to protect the ever-growing size of state government, scoff at the notion that government can be run like a business. They are, of course, wrong-minded. And in a surprising yet refreshing twist, Gov. Dannel P. Malloy seems to be challenging that conventional thinking head on, much to the chagrin of powerful interests, including state-employee labor unions. It started in late January, when the Democratic governor touted improvements sev- eral state agencies have made under his LeanCT initiative, which takes a page out of the private sector by identifying more cost-effective ways agencies can deliver services. The Department of Energy and Environmental Protection, for example, has reduced from 60 days to 10 days (83 percent), the average time to complete wastewater discharge inspection reports, providing the opportunity for faster compliance. Then Malloy delivered a budget that proposes to slash spending by hundreds of millions of dollars to better align state revenues with expenses. Last week, he announced plans to priva- tize more services at the Department of Motor Vehicles to reduce onerous customer wait times. These days Malloy sounds more like a corporate executive restructuring a finan- cially ailing company, than an idealist politician who believes every government service is sacrosanct and worth preserving no matter the cost to taxpayers. More than ever, the state needs a hard-nosed executive willing to make tough choices, and Malloy's new approach is refreshing, particularly to the business community, which has long advocated for spending restraints and a transformation of state government. State labor unions and their cheerleaders, which stand to potentially lose members and clout with some of Malloy's layoff and privatization efforts, have voiced concern and criticism over his budget. They argue the governor is protecting the rich at the expense of middle-class residents by not raising taxes further on corporations or high earners to preserve the state-employee workforce and the services they provide. That recipe, however, has proven ineffective and has put at risk many more Connecticut jobs by worsening the state's business climate and giving companies further incentive to move or shift their operations elsewhere. Two of the largest tax increases in state history haven't been able to balance Connecticut's budget or speed up the state's economic recov- ery; Malloy is finally yielding to that reality and offering a new approach to deal with it. The idea of government acting more like a business is repugnant to some, who view cor- porations as greedy entities only there to serve shareholder's interests. However, that is a mis- understanding of businesses' other true objective, which is to create value for consumers by delivering the highest quality services and products at the lowest possible price. That is the only way businesses can survive long-term and generate the profits that sate shareholders' appetites. Taxpayers, who are the consumers of government, should expect the same value and accountability, which have been clearly lacking here in Connecticut. We're not asking for a complete disbanding of the state-government apparatus. There are a lot of good, hardworking state employees who strive daily to deliver and improve crucial government services to residents and businesses. Some services can't and shouldn't be privatized, while others should continue to be funded to maintain the state's core function of assisting residents unable to help themselves. But Malloy's restructuring efforts must leave no stone unturned, and every agency and budget line item must come under close inspection. The business community is also here to help. Last week, nine Connecticut business groups urged the governor to use their expertise to "replace the historical and often rigid approaches to economic growth and the delivery of public services" with more innovative, cost-effective methods. We urge the governor to partner with the business and nonprofit communities, which must constantly reinvent themselves to survive. They have much wisdom to share. n OTHER VOICES State-run 401(k) wrong approach to retirement crisis By Karen Waltemath C onnecticut's Retirement Securities Board (CRSB) has made us the first state in the nation to complete a market feasibility report for a state-run retirement program. The report seeks to lay the legislative groundwork that could affect all but the smallest busi- nesses in the state. But adoption of the legislation might actually be counter- intuitive to the goals it seeks to achieve, alienating the back - bone of the state's employment market. Further, the goal of the feasibility study was to reduce dependency on Medicaid. Yet there is no guarantee that when a participant retires, he or she will remain in Connecticut. At the same time, there is no guarantee that retir- ees will not move to Connecticut only to find out they need Medicaid assistance. Both of these arguments negate the effectiveness of the plan. Admittedly, something needs to be done about saving for retirement. But believing that the answer lies in a state-run retirement pro- gram is like thinking you can drive across the country with only enough money to purchase a gallon of gas for the entire journey. A more effec- tive plan would be to institute a private/public partnership consisting of a statewide retire- ment education campaign that would incen- tivize employers to participate in the financial education process. What is wrong with the proposal? First, the plan does not address the real concern. The last thing anyone wants is an employee hav- ing a false sense of security only because he or she is a plan participant. There is a high probabil- ity that the proposed plan, combined with Social Security, will be insufficient. Even a 30-year-old man or woman who begins saving at 6 percent, and plans for 80 per - cent income replace- ment at age 67 will likely see a depleted retirement account at age 75. Second, the proposed mandate would require Connecticut businesses with as few as five employees to enact administrative functions to ensure their workers gain access to the state-run plan. This burden is potentially devastating for small- to mid-size companies. Opponents believe there are additional and significant negative unintended consequences. A Connecticut Business & Industry Associa- tion survey of rankings by national institutions shows that Connecticut ranks anywhere from 36th to 46th in business competitiveness. The mandates proposed in the new legislation will do nothing but lower the state's standing. Third, the plan requires Connecticut employ- ers to provide enrollment assistance, payroll deductions and education. Business owners would be liable for adherence and administra- tion, and assume liability for potential griev- ance processes. The CRSB report includes recommendations for onerous new mandates despite employer concerns. The Center for Retirement Research at Boston College, which the CRSB hired to measure employer reaction, completed a survey using focus groups and phone questionnaires that showed "small employers in Connecticut agreed that their workers are not saving enough for retirement but had many questions and con- cerns about the state getting involved. Employ- ers welcomed action if it involved compensation from the state to help offer a plan or cheaper/bet- ter retirement savings options for their workers." However, the state retirement program is merely an IRA sponsored by Connecticut with proposed legislation for employers to assist. Why not just address the heart of the matter and go straight to the education piece by cre- ating a state-supported financial literacy pro- gram to help residents prepare for retirement while providing employer incentives? The answer to the retirement-savings cri- sis is not limited to savings. Nearly 50 percent of workers nationally do not have $2,000 in savings and many face financial difficulties. A true solution provides education addressing behavior modification, which includes saving and budgeting. Studies reveal that employees pay off debt, live within their means and begin saving for their retire- ment as a result of a program that focuses on behavior modifica- tion. Employers even benefit through soft- dollar savings. The marketplace is not lacking an addi- tional retirement vehi- cle. What it lacks is a public/private part- nership for financial wellness. Although advocates of a state- mandated program argue that approxi- mately 600,000 state residents do not have access to an employ- er-sponsored retire- ment plan, it is most important to note that all have access to the same type of retire- ment vehicle proposed in the legislation regardless of employer engagement. The effects of implementing a financial planning wellness program begins with "today" while laying the foundation for "tomorrow." Connecticut has the ability to change the face of retirement — with a statewide employee financial literacy program and incentives to employers who help facilitate the education that provides lasting, long-term benefits. n Karen Waltemath is the founder of Integrated Financial Planning and Benefits Resources. She can be reached at karenw@fpabr.com. HARTFORDBUSINESS.COM POLL Should the state outsource more services to the private, nonprofit sectors? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Will Gov. Malloy's $19.87 billion budget plan help or hurt CT's economy? 29.1% Help 34.5% Hurt 36.4% Minimal Impact Karen Waltemath ▶ ▶ Admittedly, something needs to be done about saving for retirement. But believing that the answer lies in a state-run retirement program is like thinking you can drive across the country with only enough money to purchase a gallon of gas for the entire journey.