Revive Economic Growth: Give Residents Reason for Hope

November 25, 2013

The state of Connecticut owes a lot of money. The state has maxed out its credit card and is over its head in debt. Debt service as a percent of General Fund expenditures will reach an all-time high in upcoming fiscal years.

While the state usually spends 8-8.5% of its budget for debt service payments, the next biennium calls for a 12% allocation. Extending debt, bonding operating expenses, enacting tax amnesty programs and $750 million from one-time revenues sources do not constitute structurally sound budget strategies.

The governor says he inherited a financial mess. Yes, after years of Democratic majorities in the house and senate the state finances are in serious trouble. However, this administration has been in office for nearly four years and has held a super majority in both the house and senate that has supported and enacted all of Governor Malloy’s budget proposals.

The administration passed the largest retroactive tax increase in state history which included 70 new taxes on residents. Instead of surpluses or paying down obligations, we are facing more than a billion dollars in debt – no matter which office crunches the numbers.

As a tax weary public continues to face rolling deficits, negative growth and high unemployment, I have yet to see bipartisan support for a viable solution that curbs spending.

In relying on one-time stop gaps of $1.1 billion instead of spending reductions to balance the budget, a $2.3 billion deficit will still need to be addressed. It seems that tax increases have become the standard response to massive deficits by the administration.

Budgets that are based solely on high taxes and unfounded assumptions however, are driving up costs, damaging the state’s credit rating and forcing people out of the state. The Governor’s own budget office’s Fiscal Accountability Report last year warned against additional tax increases. The report stated that “extraordinarily difficult decisions to reduce spending will be necessary.”

It appears that there is no such commitment in this year’s report or the will to make tough budget decisions.

Irresponsible budget actions have people reading the tea leaves and this has quickened the pace of jobs leaving Connecticut. A number of businesses have closed believing that it is easier to move out than to continue doing business in such a high cost state.

The governor’s current strategy – to stem the tide of job losses – through million dollar business incentives from the state are not working. Instead of enticing outside businesses to move into Connecticut – taxpayer dollars are being used to move firms from one town to another.

To date, the Governor’s First Five program has accomplished the following:

  • Awarded a total of $386.3 million to 11 companies
  • Of the total awarded, $302.5 million, or 78.3% of the total, facilitated in-state moves or expansions at current locations
  • $83.8 million, or 21.7% of the total, were directed at out of state companies
  • Of the total awarded, $196.5 million, or 50.9% of the total, went to benefit companies in the City of Stamford

Under current legislation, the Governor has the ability to award First Five financing to another 4 companies before the end of the next fiscal year.

Meantime, unemployment hovers around 8% which is higher than the national or New England average and is probably higher if you factor in those who have simply stopped looking for work.

The sustainable sensible way to increase revenues is to have a robust economy and people are working and earning a good living. With money in the bank and in their pocket people can invest in a home and pay for goods and services. Income, sales and property tax revenues then go up.

The latest email I received from an angry constituent describes how many are feeling: In the last 20 years the state has really gone from being a great place to live to a disaster. The attached WSJ article shows just how bad things are. Forbes had a similarly damning article in August. The state was still in recession in 2012, the budget deficit is still astronomical after a $1.8 billion tax hike, the state pension fund is less than 50% funded and the debt per capital is among the highest in the US. This is not sustainable, and it is no wonder the state has been losing population. Until the state adopts some sensible policies regarding spending and pensions, there will be little to look forward to.

I couldn’t agree more, we need solutions that have support from both sides of the aisle to reverse this downward spiral. Legislators from both sides of the aisle, from cities with double digit unemployment and suburbs that are shouldering large tax burdens, must come together and find a way to adopt sensible polices than can revive economic growth and give residents a more positive outlook.

Sen. Boucher is a Ranking Member of the General Assembly Finance Revenue and Bonding Committee.