(Updated) It’s rare that state Comptroller Nancy Wyman gets to speak anywhere these days. As Connecticut’s chief accounting and financial officer Wyman joked that she’s not invited many places because she’s often the one who has to break the bad news when it comes to the state budget.
Wyman told a crowd gathered at the Capitol Tuesday for a budget forum that the good news is the legislature and governor’s budget offices finally agree with her on the size of the deficit, but the bad news is that it’s a little more than $500 million.
Most of the 2010 deficit is related to a decrease in income, payroll, and sales taxes, Wyman said. And most of those revenue decreases are related to the 90,000 jobs the state lost during the recession, she said.
In a few years that number gets even worse, Wyman said. The deficit will balloon to $3 billion in fiscal year 2011 and $3 billion in the following fiscal year.
The use of federal stimulus funds and other one-time revenue used in the 2009 and 2010 budget will be gone by the end of this year.
“This creates the hole,” Wyman said. “It’s big. Very, very big.”
There’s only a few things you can really do to fix our budget deficit, Wyman said. “People really don’t want to hear it, but the fact is you’re going to have to cut spending. You’re going to have do some more borrowing and you’re going to have to look at structural revenue increases,” Wyman said.
Nicholas Johnson from the Center on Budget and Policy Priorities in Washington D.C. said Connecticut isn’t alone. He said 48 other states are dealing with similar budget deficits. Montana and North Dakota are the only state’s currently in the black for the year, Johnson said.
He said over the past year state and local governments have lost $87 billion in revenues.
“State revenue will take awhile to come back because jobs take awhile to come back,” Johnson said. But cutting spending in state budgets could cost 900,000 workers across the nation their jobs, which he said could cause slower economic recovery.
He said spending cuts and raising revenue have to be part of a balanced approach to solving a budget deficit. Click here to see his full presentation.
Connecticut Voices Executive Director Jamey Bell agrees that the state should take a balanced approach, but too often that balanced approach is not applied to the revenue side of the equation. She said Connecticut eroded its tax base over the past two decades through changes to its tax code.
She said there should be a comprehensive evaluation of corporate tax loopholes and tax credits before spending cuts are made. Click here to read her full presentation. That position puts her at odds with the state’s largest business lobby, the Connecticut Business and Industry Association.
In a phone interview Tuesday afternoon Joseph Brennan, senior vice president of CBIA, said businesses looking to make an investment in the state say if the state scales back or eliminates their tax credits they will look to invest elsewhere. That being said tax credits are something the legislature should review, while keeping in mind that anything that lowers the cost of business in the state will help retain employers, Brennan said.
Brennan said CT Voices and CBIA do agree on some spending cuts and efficiencies, such as a policy change to serve more seniors and disabled individuals in their own homes and moving more prisoners to into community treatment facilities.
“The tax changes they’re proposing will hurt their long term goals and make the state less competitive,” Brennan said.
Rep. Chris Perone, D-Norwalk, said the information he heard at the forum was good because it reinforces the idea that there’s not one strategy to solve the problem.
Republicans sometimes don’t agree.
Republican Gov. M. Jodi Rell vetoed the General Assembly’s attempt to mitigate the budget deficit in December because she said it didn’t cut spending far enough. Rell had proposed cutting $116 million, while the legislature approved delaying a tax increase on wealthy estates, cut about $12.4 million in spending and approved moving about $23 million from off-budget accounts to the general fund. Democratic lawmakers said Rell’s spending cuts would cost the state 5,000 private sector jobs.
But that’s not to say Democrats are opposed to cutting any spending.
Perone believes the legislature can make cuts as long as they target those cuts wisely, so as not to threaten the economic recovery.
Acknowledging the reality of the budget crisis may be the first step, but Perone said both political parties are going to need to work together to solve the problem.
“Political grandstanding is going to be ill-served this year,” Perone said.