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Bipartisanship or brinkmanship?

The Newtown tragedy has prompted Connecticut lawmakers to create a unique bi-partisan process to better address safety concerns. As thousands descend on the capitol to add their voice, another crisis continues to unfold; a massive budget deficit of $2 billion over the next two years that may require the same out of the box thinking. How did we get into this mess? Let’s connect the dots.

During the worst recession in recent memory, state government increased spending by 7.2% in 2011 and 2012, necessitating the largest retroactive tax increase in state history. The new newly proposed two-year budget spends even more, 10% or $1.8 billion in the next two years. In the midst of this economic downturn with chronic high unemployment and facing billion dollar deficits, state spending has continued to increase. Connecticut taxpayers pay for this excess with record tax increases and short-term gimmicks with long term costs.

The State Comptroller and the non-partisan Office of Fiscal Analysis have determined that the FY 2013 state budget is nearly $140 million in deficit, despite the lower, $64.4 million deficit estimated by the Governor’s budget office. Just one month shy of a bipartisan mitigation plan to resolve fiscal deficiencies, we find ourselves staring straight at another fiscal crisis. The fiscal hole is deepening as you read this opinion piece.

Moody’s credit rating agency recently reacted to our State Treasurer’s announcement that she would be securing a $550 million line of credit. Some points made by a Moody’s issuer include:

  • Though the line of credit provides access to liquidity, we view the state’s need for the facility as credit negative because it reflects the state’s liquidity and budget challenges.
  • The state’s budget deficit comes at a time when many states are reporting revenue improvement, higher reserve levels, and reduced need for cash flow borrowing.
  • Connecticut is lagging behind the rest of the nation in economic recovery, resulting in revenue underperformance and rising expenses
  • Job growth remains slow and the state has not recovered jobs lost during the recession.
  • The state’s unemployment rate continues to inch higher, reaching 9.0% in October 2012. It fell to 8.6% recently but only due to a reduction in our labor force (while the national rate has gradually declined to 7.9%
  • The state originally planned to use surplus funds to retire the deficit bonds two years ahead of schedule. However, the fiscal 2012 year-end deficit derailed that plan.
  • With another deficit projected for fiscal 2013, the state is unlikely to build its reserves in the near term and liquidity is expected to remain slim.

It is clear state government has a spending problem. New bonding proposals totaling nearly $2 billion have been floated by the administration to spur job growth. Connecticut should not buy jobs with bonding money. It should create a positive tax and regulatory environment for the private sector to grow jobs.

The proven way to improve revenues is to grow private sector employment. Job growth equals a healthy economy. Unfortunately, Connecticut is going in the opposite direction. Its labor force shrunk by 51,000 or 2.68% last year, the largest loss in the nation.

How can we afford spending so much in bond funds without risking even higher budget deficits? These monies get paid back over 20 years at an assumed 5% interest rate. As more and more annual spending becomes fixed as debt service, fewer funds are available for state services. This is an unsustainable path.

It is crucial both sides of the aisle work together to pass a fiscally responsible budget. And just how would a state government addicted to spending do this?

The budget proposed should not substitute one tax for another. We all agree with removing the car tax but, but not by substituting the 10% corporation surtax, electricity tax and insurance premium tax instead.

It should not increase town property taxes by taking away “payments in lieu of taxes” as it shifts the tax burden to local property owners and business, even if funds are reallocated to education.

Instead, the administration should work harder to reduce labor costs.

  • Many lawmakers have suggested re-negotiating with the unions. The state was promised hundreds of millions in union concessions that never materialized.
  • Pension reform must be pursued. The states of Rhode Island and Florida have been successful in moving their workers from a defined benefit plan to a defined contribution plan. Florida’s pension is almost fully funded. Connecticut’s pension is funded at 42%, a huge liability for future taxpayers.

The governor stated “we need to live within our means” several times in his budget address. Will this year provide us with an opportunity for bipartisanship or brinkmanship?


Toni Boucher (R-24) is Ridgefield’s state senator.

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