Hartford Business Journal

20 Hartford Business Journal • August 22, 2016 www.HartfordBusiness.com OPINION & COMMENTARY EDITORIAL CT's fiscal crisis presents reform opportunities "Y ou never want a serious crisis to go to waste." Those words were made famous most recently by former President Obama chief of staff and now Chicago Mayor Rahm Emanuel, when he was talking to a group of corporate executives in 2008 about the opportunities for a large-scale govern- ment response to the financial crisis and other serious issues facing the country at the time. What followed were several sweeping reforms from an $800 billion-plus stimulus package to the Affordable Care Act. Now it appears, Gov. Dannel P. Malloy's administration is taking a page out of the Rahm Emanuel playbook, using Connecticut's own fiscal crisis as a way to reform government. The latest example: Last week the Department of Developmental Services (DDS) commissioner unveiled a plan to privatize dozens of state-run group homes and other services for the intellectually disabled, which could save the state an estimated $70 million by next fiscal year, mainly through the elimination of 605 state jobs. Besides offering a money-saving opportunity, the move caters to a state and nation- wide trend of moving the infirmed and disabled out of institutionalized care and into community settings. The savings is largely derived by replacing a unionized, higher- paid state workforce, with lower-paid nonprofit or private-sector workers. Broadly speaking, we agree with the policy move, although we understand the econom- ic hardship that will be placed on those state workers who will be losing their jobs. Con- necticut's fiscal crisis has left Malloy and other government officials little choice, but to find ways to dramatically cut spending in areas where we dish out the most amount of money. Providing care to the intellectually disabled and the sick may be one of government's most important tasks, but also the most costly. DDS, for example, employs thousands with a billion-dollar plus budget to provide care and services for about 16,000 people. Finding ways to rein in those costs, while also preserving or improving the quality of services, is a must. Union officials, as expected, blasted the Malloy administration announcement, arguing that the private sector won't be able to provide the estimated savings or match the service standards provided by state-run institutions, but the facts don't necessarily match the rhetoric. For example, a 2011 report by the Legislative Program Review and Investigations Com- mittee concluded, among other things, that it is on average about twice as costly for resi- dential care in public settings, with little to no difference in the quality of care provided. The report recommended an accelerated pace of moving away from a "dual service system to a private sector service model." That's not to say privatization plans are without risks and/or challenges. We'd like to see the program's full implementation blueprint before we give it an all encompassing stamp of approval. Few details were shared on how the transition will be managed. Also, as Hartford Business Journal columnist John Horak has written about recent- ly, the significantly lower pay for private/nonprofit care and service providers is a threat to the system, making it difficult to retain quality workers. Nonprofits are so underfunded by the state's contract-based system, Horak asserts, that some providers have a difficult time paying their workers a living wage. That's a concern that must be taken into consideration because if the nonprofit sector can't attract committed, talented caregivers, quality is at risk. However, desperate fiscal times call for drastic measures, and reforming Connecti- cut's costly long-term care and services is a must. We applaud Malloy for taking proac- tive measures in this regard. Now we just hope the implementation is effective and the projected cost savings become a reality. n OTHER VOICES Minimum-wage hike has drawbacks By Kevin Maloney W hile Connecticut legislators take the summer off to campaign for re-elec- tion, some continue to tout potential future legislation that can only be described as anti-business. As General Electric relo- cates to Boston and Aetna leaves the door open to departure from Hartford, law- makers should be very cautious about doing anything in the next session that would make it more difficult to run a big or small business in Connecticut. The Connecticut economy has not fully recovered from the Great Recession and state government still does not have its own fiscal house in order. One of the signature items on the agenda of some anti-business legislators is an increase in the minimum wage to $15 an hour. While every- one supports higher wages, a quick increase of this magnitude would almost certainly have immediate negative effects on small business- es that rely on entry-level and part-time work- ers and the employ- ees themselves. This is more than conjecture; hard evi- dence is already com- ing in from Seattle where the campaign for a nationwide $15 an hour minimum wage has had one of its most significant victories to date. A University of Washington survey has found that 30 percent of Seattle employers have either reduced staff, or intend to reduce staff, as a result of the wage increase requirement. The Federal Reserve Board of San Francisco has also reported "a higher minimum wage results in some job loss for the least skilled workers — with the possibility of larger adverse effects than earlier research suggested." Both findings were included in an article published by Michael Salts- man of the Employment Policies Institute. The same report found additional evi- dence of small business closings and a reduc- tion in hours for minimum-wage employees in markets around Seattle where similar wage laws have been put into effect. Clearly this is not just a matter of forcing employers to reduce their profit margins. This dramatic boost in the minimum wage is obviously hurt- ing many of the people it was specifically designed to help. Low-wage workers are los- ing their jobs completely or being forced to reduce their work schedules. Common sense also tells us that anoth- er way for employers to recoup the cost of forced wage hikes is by raising prices for consumers. The impact of sudden minimum- wage increases is so profound that a survey of labor economists by the University of New Hampshire found that 72 percent oppose the idea of a $15-an-hour mandate. Voting to mandate artificial wage increas- es in the private sector may seem like an easy "yes" vote for many in the Connecticut leg- islature, but given the fragility of our state's economy, coupled with evidence and experi- ences from elsewhere, it would be a decision fraught with real-world consequences. Government leaders from the governor on down have already warned that the state budget is only temporarily in balance and that deficits of more than $1 billion a year are on the hori- zon at least through 2018. It is time for our state government to focus first on secur- ing Connecticut's own financial future before meddling in the pri- vate sector, where government mandates — from wage hikes to paid-leave mandates — can do real harm, especially among small businesses. The smartest thing lawmakers can do to improve the Connecticut business climate is to stabilize government finances for the long term. n Kevin Maloney is the owner of Northeast Express Transportation Inc. in Windsor Locks, and serves as chairman of the state Leadership Council for the National Fed- eration of Independent Business. HARTFORDBUSINESS.COM POLL Is privatizing care for the developmentally disabled good policy? ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Who would you prefer to be president of the United States? 43.9% Hillary Clinton 56.1% Donald Trump Kevin Maloney ▶ ▶ Voting to mandate artificial wage increases in the private sector may seem like an easy "yes" vote … but given the fragility of our state's economy … it would be a decision fraught with real-world consequences. Send Us Your Letters The Hartford Business Journal welcomes letters to the editor and guest commentaries for our opinion pages. Electronic submissions are preferred and welcome at: editor@HartfordBusiness.com.

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