Capitol Update from Senator Frantz

September 25, 2009

The biennial state budget lapsed into law recently unsigned. The majority party that wrote the budget doesn’t want to talk about it. Democratic candidates for governor are criticizing Gov. M. Jodi Rell for not vetoing their budget. What did we end up with?

I think we all need to ask ourselves whether we are better off with this budget that became law by default and without much fanfare in southwestern Fairfield County. The good news is that many accounts, including education, were flat funded (no change from last year). The bad news is that we have missed the opportunity of many lifetimes to attract new high-quality jobs, firms, individuals and families to the state of Connecticut to further enhance our tax base and help fix our immediate as well as long-term budget challenges. Thankfully, we live in a country where competition between the states is still alive and well. Regrettably, majority party leadership simply forgot that we have to compete. As in the marketplace, competition between the states assures the best outcome regarding overall growth in jobs, industry and disposable income. Given a sensible tax code, it also assures a steady, reasonable stream of revenue to the state, which in turn pays for our education, social service, infrastructure and other important needs.

Simply by leaving our tax rates unchanged and generating a budget that reflected the economic reality of today, the number of individual and corporate taxpayers that would have come to our state could have significantly enhanced our state’s ability to fund its budget. Instead, with increased tax rates, we will not see nearly as many taxpayers, if any, relocating to Connecticut. Nor will we necessarily see any increase in tax revenues to Hartford, unless the economy recovers more quickly than expected, due to much lower salaries and capital gains, as well as unknown amounts of capital loss, carry forwards. The solution, proven time after time, is to lower tax rates and create a larger tax base. The positive effect is nearly immediate and lends itself to fiscal soundness for the long term.

We have a spending problem in Connecticut. The budget has grown on average by just under 7 percent for more than a quarter-century. Regardless of how vibrant a state’s economy is, simple mathematics and demographics will prevent this from continuing for much longer if a balanced budget is even a remote priority. Our revenue problem could have potentially been short-term if the General Assembly was capable of making decisions that reflected the reality of the marketplace. The Office of Fiscal Analysis has already forecast a total deficit of more than $9 billion between 2012 and 2014. We have a very serious existing fiscal problem with an emerging fiscal disaster if we don’t address our rate of spending increases and attract more taxpayers to the state instead of giving them every reason to leave. There are limits on how much a state can borrow, tax and securitize.

I have argued on the floor numerous times that the most cruel thing we can do to those who are truly in need in this state is to assure that we allow expensive government to expand and swallow up much of the resources that would ordinarily be going to them. It seems implausible that a state could become insolvent, but remember how many municipalities are technically bankrupt without huge annual support from Hartford (your tax dollars). The once-thriving industrial center of Bridgeport did, in fact, file Chapter 9 in 1991. Could the equivalent happen at the state level? Yes.

I voted against the proposed budget and remain devoted to fighting for what is best for the state and those in need over the long term, not just tomorrow. Too much spending and too much taxing by Hartford will virtually guarantee a repeat of the experience the once successful municipalities of this state have faced and continue to face today. If one genuinely cares about people, especially those in great need, he or she fights for a budget that provides a sound fiscal future, not a dismal one. We fought and we lost, and so did, I believe, the people of Connecticut for the long term.