Hugh McQuaid File Phto
UConn economist Fred Carstensen (Hugh McQuaid File Phto)

Two years into Gov. Dannel P. Malloy’s term, is it fair for his administration to continue blaming the state’s economic woes at least in part on his Republican predecessors? “Absolutely,” a University of Connecticut economist said Thursday.

During his first year in office, Malloy closed a $3.67 billion budget deficit through a combination of an historic tax hike and labor concessions from state employees. But now the state’s ledger is back in the red by a number that seems to be growing by the week.

In defending the administration, Malloy and his senior communication adviser, Roy Occhiogrosso, frequently point to years of neglect under former Republican governors. But critics say halfway through his term, it’s time for Malloy to own up to the state’s economic situation.

Fred Carstensen, director of UConn’s Connecticut Center for Economic Analysis, said even two years in, Malloy is well within his rights to pin blame on past governors for the state’s fiscal situation. Carstensen said legislative Democrats also shoulder responsibility.

“It was a bipartisan failure,” he said.

That’s because for years, state officials haven’t been concerned with tracking the state’s own performance and economic trajectory, he said. Carstensen faulted former Gov. John Rowland’s administration with allowing mechanisms aimed at monitoring the state’s economic progress to disappear.

“Fundamentally, we stopped paying attention to our own progress,” he said.

Over the years, he said, some investments have been made. Rowland put billions into the state’s higher education system, which Carstensen said was a good thing. The problem is, the investments weren’t linked to areas where our economy was growing, he said.

Meanwhile, Carstensen said former Gov. M. Jodi Rell and the Democratic-controlled legislature spent every dime available to the state while ignoring its economic trajectory as compared to other states.

“Malloy comes in with this terrible budget situation. The Rainy Day Fund was gone. I mean, the cupboard was bare, nothing was there,” he said.

So how is Malloy doing so far? Carstensen said despite the current deficit projections, he gives the governor good grades. But he could be doing more. He said Malloy’s efforts have been plagued by an anemic national recovery from a recession that was much worse than anyone anticipated and the state’s negative momentum. He said Malloy has been in a defensive position, trying to minimize losses.

Carstensen likened changing the state’s economic trajectory to turning around a moving oil tanker.

But Malloy’s two-year budget is running a deficit, estimated most recently by the state comptroller at $415 million. Carstensen said Malloy can’t disown a budget he proposed.

“To some extent it’s subject to external phenomena, but obviously it’s his budget,” he said.

Republicans have criticized Malloy and the Democrats for raising taxes without adequately reducing spending. But despite the deficit, Carstensen defended some of that spending.

“We had a false optimism in adopting the biennium budget. The economy was much weaker than we gave it credit for,” he said. 

Carstensen said Malloy has been spending money making investments that have been lacking for some time.

The state borrowed $291 million to help build the genomic research lab in a deal approved by the legislature last year with the Maine-based Jackson Laboratory. The deal is expected to create and retain 300 jobs by its 10th year of operation.

Carstensen said that deal was like “winning the lottery” and now has people in the bioscience field looking at Connecticut in a way they weren’t before. But even so, he said it may be five or six years before it has a real impact on the state’s economy.

In the meantime, Malloy and the legislature will have to find places to cut state spending, a process Carstensen said will be difficult. Cuts to services impact state residents and can further damage the economy.

Carstensen said Malloy and lawmakers should consider imposing a statewide property tax targeting people who don’t live in Connecticut. He said such a tax would offer rebates for people who live here, but he added that there are a lot of people who own property in Connecticut but live elsewhere who could be taxed.

“Why are we doing them such a big favor?” he asked.

As state officials grapple with the current shortfall, Carstensen said it’s important they keep an eye on the overall direction the state is headed, and to make the investments it needs to right the ship.

“If we don’t change that trajectory this fiscal crisis will be minor compared to what we’re facing down the pike,” he said.

He likened the state to a family struggling financially and trying to determine if it can afford to send a daughter to college.

“Down the pike we’re going to be better off if she goes to college and gets her degree,” he said.

CTNJ File Photo
UConn economist Steve Lanza (CTNJ File Photo)

Steve Lanza, a research associate in the University of Connecticut’s Economic Department, said he saw the current budget problem less as someone’s fault and more a result of an economic recovery that turned out to be more sluggish than people had hoped a year or two ago.

With the economy lagging, the state’s revenues are down and more people are in need and accessing state services, he said.

“Most reasonable people felt last year, basically by hook or by crook, things had been fixed,” he said.

If anyone has contributed to the problem, Lanza said it wasn’t Republicans or Democrats here in Hartford. Rather, he said it was Congressional Republicans who dug in their heels in recent years and resisted efforts to stimulate the economy. They also helped bring the country to the brink of default, he said.

But much of the problem is beyond control.

“The fact that we’re growing slowly isn’t so much that we haven’t done what we’re supposed to do here, it’s just that the U.S. recovery hasn’t seen the growth that was expected,” Lanza said.