The State of The State

On February 16th, Governor Dannel P. Malloy will deliver his budget address. Thus far, Governor Malloy has acknowledged the severity of our state’s budget crisis and it is my sincere hope that his address will outline a responsible plan to begin putting Connecticut back on its feet.

Today, our state faces a $3.6 billion budget deficit, a 9% unemployment rate, limited job growth, and growing unfunded liabilities. Both the Governor and the legislature are tasked with promptly eliminating these shortfalls in order to preserve the state’s fiscal welfare for the long-term.

For too long we in the legislature have allowed government spending to increase at the expense of our taxpayers. Spending has actually increased 227% since 1980 – rising from $4,400 per household to more than $10,000 per household – while median household income has remained relatively flat. The notion of borrowing more to put off fiscal insolvencies to a later date is no longer an acceptable approach to budgeting.

A good first step towards economic recovery is Governor Malloy’s endorsement of Generally Accepted Accounting Principals (GAAP), a plan that has been proposed by Republican leaders. GAAP is a set of rules established by the Financial Accounting Board which will be used to more accurately and transparently report our state’s revenue and expenditures. Adopting GAAP as our reporting standard will likely provide a more exact portrait of the impending fiscal challenges and is expected to show that our deficits are even larger than currently predicted. GAAP will also prevent the legislature from using the past accounting tricks of acquiring expenses in one fiscal year, but paying for them in the next in order to falsely report a balanced budget.

A second step will be reducing the size and scope of government. Recently I signed onto a set of proposals that does exactly this – the ‘Common Sense Commitment.’ These policies are constructed with the realization that state spending has outpaced revenue and that our government is taking from us, rather than working for us. Among the core proposals are initiatives to reorganize and downsize government; limit bonding to no more than 10% of the state budget; roll back spending to previous levels; and merge 43 state agencies into 11. These types of hard cuts will save taxpayers billions of dollars over the next two years and will also help preserve municipal aid.

It is estimated that in 2012, approximately $485 of every Connecticut resident’s income tax payment will fund future state employee retirements and that the state employee retirement system’s $11.7 billion unfunded liability represents approximately $3,325 per man, woman and child in the state. To lessen this financial burden, the ‘Common Sense Commitment’ contains proposals to freeze state employee salaries for two years; reduce the state’s workforce by 5%; reform employee pensions; and reduce legislators’ salaries for two years. A two-year pay freeze for state workers would amount to a $502 million savings alone.

Other features of this proposal address Connecticut’s anti-business climate by eliminating the 10% corporate surcharge and business entity tax; providing tax credits to companies that hire off unemployment rolls; and expanding the job creation tax credit. These initiatives support the principal that government does not create jobs; people do.

It is no secret that Connecticut’s fiscal house is crumbling. The state’s indebtedness per capita is among the worst in the nation. Our most important task as a legislative body will be to work with Governor Malloy to adopt these difficult but necessary decisions that genuinely reduce the size and cost of government. These initiatives will attract the jobs and revenue necessary to sustain a healthy economy and a right-sized state government for the long-term.