Rep-Am: Connecticut Budget – Don’t rely on windfalls

January 25, 2017

Editorial as it appeared in the Republican American

Last week, Connecticut seemingly received good fiscal news.

Gov. Dannel P. Malloy reported to state Comptroller Kevin P. Lembo that the adopted $19.7 billion 2016-17 budget has a $23.3 million surplus.

Gov. Malloy previously had projected a $41.6 million deficit, while Mr. Lembo estimated the budget hole at $56.2 million.

“It is a good sign that the budget continues to stabilize, and our main focus can turn to the 2018-19 budget years,” said House Speaker Joe Aresimowicz, D-Berlin.

The situation actually is nothing to brag about.

The budget is eminently flawed, and it is essential that Capitol policymakers adopt smarter fiscal practices.

Among the drivers of the “surplus” are funds Connecticut received as a result of lawsuit settlements.

The deal state Attorney General George C. Jepsen reached with Moody’s Investors Service generated $31.5 million. The state took in $120 million as a result of Mr. Jepsen’s earlier deal with RBS Securities Inc. Both cases stemmed from the 2008 financial crisis, the Republican-American reported Jan. 21.

Reliance on one-time revenues masks deficiencies in Connecticut’s budget and economy.

The 2016-17 budget adopted last May by Democratic Gov. Malloy and the (then) Democratic-dominated legislature doesn’t adequately control the compensation of state employees.

It relies on gimmickry, like transferring $53 million from smaller budget funds to the General Fund, the largest of the nine funds that comprise Connecticut’s budget.

Indeed, this budget prompted Fitch Ratings Inc. and Standard & Poor’s to downgrade the state’s credit ratings.

Another contributor to the superficially improved budget outlook is Connecticut’s collection of $80 million in additional corporate-tax revenues.

This is the result of corporate-tax changes made in recent years by Gov. Malloy and the legislature.

These changes “sparked a business tax revolt led by General Electric Co., several other blue chip companies and the Connecticut Business & Industry Association,” according to the Republican-American.

Senate Republican President Pro Tempore Leonard A. Fasano, of North Haven, asserted companies paying more in taxes hardly is a positive development.

It also is worth noting that there has been a decline in the collection of sales and use taxes; income taxes; special revenues; and federal grants.

Connecticut’s budget is not stable for the long term.

As Gov. Malloy and lawmakers negotiate budgets for the 2017-19 biennium, they should take a fundamentally different approach, for the sake of the state’s economy.

Policymakers would be wise to, among other things, meaningfully control personnel costs, ease reliance on the business community for funds, and end gimmickry and reliance on one-shot revenues.

As Sen. Fasano said, “From the start, we have to budget using money that we have, not money that we find after the fact.”