HARTFORD, Connecticut — Wage growth in Connecticut remains below pre-recession levels despite improvements in job growth, further complicating the state's budgetary challenges, according to report released Thursday by Comptroller Kevin Lembo's office.
The report shows that lackluster wage growth has affected state revenue, including the withholding portion of the personal income tax that also struggled to reach growth levels before the recession — something that's both a state and national problem.
"We're just not back to anywhere near the type of wage growth we were seeing pre-recession," said John Clark, director of budget for Lembo's office, adding that Connecticut's wage growth rate is slightly better than the national rate. "This is a significant issue for the state, because wage growth has an impact on overall economic growth."
In August, the average gross hourly rate in Connecticut was $29.50, according to the Federal Reserve Bank. While that marked a 4.3 percent improvement from August 2014, Clark said it's too soon to tell whether that's the start of an improving trend. During the 2014 calendar year, wages in Connecticut grew only 1.8 percent, to $28.40 an hour, as of December 2014.
The new report comes as Democratic Gov. Dannel P. Malloy cuts more than $102 million from the budget, just three months into the new fiscal year, in order to balance this year's $20 billion budget. He has blamed recent stock market losses for a drop in state revenues and has not ruled out future reductions.
Lembo, also a Democrat, said state officials need to make the "right decisions" to improve wage growth.
"There's very little that can be done, besides growing the pie, making the appropriate investments, trying to set up a business environment that is fair and friendly," Lembo said. "At the same time, trying to build some consistency into the way that we do business so that those who would like to come and grow will do that and not be afraid that we're going to pull the rug out from under them next time."
The issue of slow wage growth is multifaceted. Lembo said some employers have become used to operating with fewer employees since the recession and figured out ways to get the work done. Meanwhile, some jobs have become automated, certain skill levels are no longer needed and some salaries have dropped. He said Connecticut has moved away from medium-level, higher-paying jobs in certain industries as the state's economy evolves.
Lembo's report also highlights Connecticut's unfunded pension liabilities for state employees.
Based on the most recent actuarial valuation, the State Employees Retirement System is 41.5 percent funded, or nearly $15 billion in unfunded liabilities. About 82 percent, or $1.2 billion of this fiscal year's $1.5 billion annual state retirement fund payment, will cover pensions for employees who've already retired.
That figure is predicted to climb to 89.1 percent of the annual pension payment, or $2.3 billion, in fiscal year 2032.