Gov. Dannel P. Malloy’s budget director said it makes him sad to have to cut close to $1 billion in spending from the two-year budget the governor will present to the legislature in February.
“I recognize and am committed to undertaking those spending cuts, but we do so at great cost,” Ben Barnes, Malloy’s budget director, told the legislature’s Finance and Appropriations Committees Tuesday.
He said the short term result of those spending cuts—which he declined to identify—will have a negative effect on the state’s economy, but are necessary in the long term. The cuts also mean residents may not have access to services they are currently receiving from the state.
“We will convert deficits into surpluses,” Barnes said.
When Sen. Rob Kane, R-Watertown, pressed Barnes on where the administration stands on increasing taxes, the budget director with young children evoked Dr. Seuss.
“I will not, I shall not, I do not wish to,” Barnes said of any tax increases.
After the response came out of his mouth, Barnes joked “I feel like I am in ‘Green Eggs and Ham’.”
But as Malloy did during his 2010 campaign for office, Barnes sought to find some wiggle room and refused to completely rule out any tax increase.
Rep. Vincent Candelora, R-North Branford, wondered if that meant they would consider renewing taxes scheduled to expire this year such as the tax on electric generators.
Barnes said he hasn’t had a conversation with Malloy about those specific issues, so he can’t answer the question. But he tried to assure wary lawmakers that his focus over the past few weeks has been solely on the spending side of the budget.
The General Assembly is expected to be called back into session before Christmas to address this year’s $365 million deficit. Malloy will tackle the estimated two-year $2.13 billion deficit when he releases the 2014-2016 budget in February.
An increased demand for Medicaid coverage seems to be driving this year’s budget deficit, but Rep. Sean Williams, R-Waterford, said Tuesday’s presentation by the Office of Fiscal Analysis and Office of Policy and Management proved there are plenty of structural deficiencies in the state budget.
He said the administration and lawmakers are going to have to get over the idea that there are “sacred cows” in the budget.
“Nothing should be a sacred cow,” Williams opined outside the hearing room.
He said the current deficit exists because no one has been willing to make the necessary reductions.
But Barnes explained that this isn’t a typical recession.
“There’s no question we have had a slower-than-normal economic recovery,” Barnes said.
The recession started in 2008 and Barnes told lawmakers it may last until next fall, almost six and a half years later.
“This recession has had a longer and deeper impact on state revenues than the 2002 recession,” he said.
Republican lawmakers have been grousing about the $2.5 billion tax increase Malloy implemented in 2011 and have maintained that the state’s problems couldn’t be solved with tax increases alone. That same year, Malloy was also able to get the state employee unions to agree to a $1.6 billion concession package, which among other things requires them to make increased contributions to their pensions.
“We really should focus on addressing more of these structural issues,” Rep. Gail Lavielle, R-Wilton, told Barnes.
“Maybe adhering to the spending cap is perhaps not ambitious enough given this ambient economic uncertainty,” Lavielle said.
According to Barnes if the state spends what it spent last year, it will go over the spending cap by $1.2 billion in fiscal year 2014 and $1.8 billion in fiscal year 2015.
“We must adjust our current services spending,” Barnes told the joint committee.
But there were still some on the committee who wondered if the state could find places to cut taxes in order to increase revenues.
It almost sounds counter-intuitive, but Rep. Pam Sawyer, R-Bolton, noted that the state’s gas tax plummeted in 2005 after the state began raising the gross receipts tax.
“Suddenly in 2005 there’s a wonk, a bam and the numbers fall below the line,” Sawyer said.
The first sentence under the graphic says, “Consumers began to curtail consumption as prices began to rise.”
Sawyer suggested Connecticut is surrounded by three states with lower gas prices and consumers may be fleeing to bordering states to fill up.
“We are not in a position where we’re competitive anymore,” Sawyer said. “We’re losing out because of the tax structure.”
She wondered if the state could lower the gas tax and make more money.
Barnes said he’s not seen an analysis that suggests that the amount of lost sales from people going over the border would be sufficient enough to make up for the loss of revenues on existing sales.
He said he would work with his staff to find out if there’s any viable way to estimate that.
Click here to read Barnes’ report and here to read the report from the Office of Fiscal Analysis.