Posted on November 30, 2018
As we prepare for opening day in January, the Fiscal Stability Commission, a group of business leaders charged with recommending budget fixes, and the Office of Fiscal Analysis, a non-partisan agency that provides financial data, presented the budget projects for Connecticut’s future. Both agree that Connecticut is in very difficult financial shape and has not recovered from the recession of 2008.
While many of the suburbs voted for change, Connecticut has returned one party rule to Hartford. Because a tie no longer exists in the Senate and the numbers are not as close in the House, I am concerned that bipartisan budget talks may not come to fruition. In the House, representatives have created a Progressive Caucus with 45 members, roughly half of the Democrat party. They are promoting a more progressive tax code where higher income earners will pay more taxes. Connecticut tried that in 2010 and lost billions of tax revenue over the past decade as wealthy residents and businesses moved out of the state. In fact, Governor Malloy’s budget secretary points out that Connecticut’s projected demographics over the next decade show a nine percent decrease in our population aged 45 to 64. Those individuals are our highest income tax payers. In the past five years, our highest income growth industries have averaged roughly only one percent growth per year, and our fiscal agencies are predicting another recession on the horizon.
On a brighter note, the bipartisan budget that passed last session created some constraints on spending that will help the state going forward, and I hope they remain in place. We placed a hard cap on borrowing so the state cannot borrow over $1.9 billion per year. We statutorily created a spending cap, which automatically restricts the amount of spending growth permitted in a budget. We imposed a cap on revenue and “volatility” which essentially takes income tax revenue in excess of $3.15 billion and places it in the Rainy Day Fund. Under this bipartisan budget, Connecticut has already saved over $1.7 billion in its Rainy Day Fund, the highest in history.
Last week, I met with Governor-elect Lamont. I believe he understands the dire state of affairs. With United Technologies splitting into three companies and Aetna merging with CVS, Connecticut must demonstrate to our business community that we are poised to do better. The Progressive Caucus’ proposals seeking to expand government and taxes are coming at the wrong time. With government budgetary fixed costs at over 51 percent, Connecticut needs to focus on growing the economy. In our meeting, Governor-elect Lamont expressed his desire to work on a bipartisan basis and he shares our concerns over not achieving a balanced budget within the session deadline. While each group offers solutions to fix the problem, I hope we come together with meaningful dialogue and put forth another bipartisan solution.
