State Budget Grows at Unsustainable Rate

May 29, 2013

Every two years, Connecticut residents are right to be concerned about the state’s budgetary process. In recent memory, this process resulted in the largest tax increase in state history, raising the burden on individuals, families and businesses alike in addition to slowing the economy and job growth. This year, the process has begun once again, and negotiations are ongoing. Both the Governor and the legislative majority have proposed similar budgets that would increase spending nearly 10% to just shy of $44 billion over a two year period.

Commonly referred to as the “Land of Steady Habits,” Connecticut has unfortunately developed the steady habit of producing increasingly larger and unsustainable budgets. Last month, the majority party co-chairs of the Appropriations Committee released their proposed budget that would cost $43.9 billion over the biennium. Surprisingly, their proposal was more expensive than the budget initially proposed by Governor Dannel P. Malloy in early February. The Legislature has had a lock on the budget creation process for a generation and will likely prevail yet again in producing another record level of spending during the next two years amidst a sluggish economy and anemic job growth.

Consider the unsustainable growth rate that has taken place over the past twenty years. While we must also consider the impact of inflation, the numbers speak for themselves. At that time, the Fiscal Years 1994 and 1995 budget totaled $19.1 billion. Today, the Governor’s proposed budget would spend more than double that amount. I wonder when or if the legislature will ever recognize the lack of sustainability of this kind of budget growth.

It is interesting to note that the state constitution would have to be changed in order to allow for spending to increase by this amount. Remarkably, the governor announced his intention to raise the spending cap in his “State of the State” address in February. The move was also later supported by the legislative majority in their proposed budget. It is unfortunate that their proposal would change the rules of the game that have helped maintain a certain degree of fiscal discipline simply to allow for additional spending. This also goes against the will of the people, who voted in favor of a constitutional amendment to protect the taxpayers from uncontrolled spending increases after the imposition of the state income tax in 1991. While previous administrations have raised the spending cap on a temporary basis due to emergency circumstances or to spend surplus funds, this proposal to permanently raise the spending cap is simply poor public policy.

Beyond the concerns over spending increases and raising the spending cap, our state’s fiscal health is projected to remain stagnant or decline over the next two years. Each month, the State Comptroller submits a report on the current status of our budget to the Governor’s Office. His most recent report painted a brighter picture of the current fiscal year but offered several ominous projections for the next two years. This year’s potential surplus is due to one-time revenue gains from Connecticut residents recording their investment income before the higher federal tax on capital gains took effect on January 1st and from a very large and unexpected increase in revenue from the estate tax. This mixed message suggests that it will become much more difficult to raise the revenue necessary to fund an enlarged state budget.

As Ranking Senator of the legislature’s Finance, Revenue and Bonding Committee, I have long advocated for pro-growth proposals that would encourage economic development and job creation. Unfortunately, this increase in spending makes it nearly impossible for the committee to reduce the tax burden on Connecticut businesses, families and individuals in order to achieve progress in these areas. It will also only continue to pass the burden down to future generations who will have to make the tough decisions that the current budget proposal regretfully avoids. Additionally, if the projected revenues do not match the spending increase as is currently expected, I am certain that we will once again see a renewed and misguided effort to raise taxes once again.

Considering the significant economic challenges facing our state, this proposed budget continues the troubling trend of increased spending that will further weaken our state’s fiscal health over the next few years. Unfortunately, this budget also does nothing to contribute to the state’s economic recovery or help the bleak employment situation. In the coming weeks, I am hopeful that Republicans will be invited to join in the negotiations to develop a more responsible budget that will promote economic growth and create jobs.