Does anyone like Gov. Dannel Malloy’s budget? A poll found that 62 percent of voters disapprove of the way he’s handling it.
Not even the legislature’s Democrats could muster sufficient energy to mask their disbelief at the stink bomb of a budget that Malloy left on their desks.
The problem is almost no one is happy with the governor’s spending plan. It cuts vital services to our most vulnerable populations — the developmentally disabled, the elderly, and those who receive mental health services.
On the revenue side, Malloy’s proposed budget saddles businesses and hospitals with higher taxes. In 2016, the changes to corporate taxes in the proposed budget mean businesses are facing a projected 44 percent tax increase.
The lack of a predictable, sustainable fiscal structure in the state is troubling to the state’s businesses, as it should be to all of us.
At a recent breakfast with members of the Hartford business community, Malloy’s budget chief, Ben Barnes, looked tired. Not only had he spent the last few weeks introducing and explaining an unpopular budget, he had just been given the news that, because of a calculation error, the budget was over the constitutionally mandated spending cap.
The budget, as it was introduced, is, in fact, $54 million over the cap for 2016. But Barnes said the administration would make no changes, as it’s up to legislators now.
Clearly the budget will not stay as it was introduced. Now that Malloy has disowned it, the leadership in the House and Senate will have to figure out how they want to fix it.
They only have a few choices, given the constraints this budget is under.
So why is it such a bad budget?
For one, Malloy had to fill a huge two-year, $2.7 billion, deficit — one he claimed didn’t exist when he was running for re-election.
And, more importantly, years of bad decisions made by state lawmakers are now catching up with us.
When you add up the total the state has to spend on increased debt service payments — payments Malloy put off making for the past two years — and the increases for state employee pay and benefits, the $565 million total is greater than the $521 million increase in total spending from 2015 to 2016. That means the budget office had to make cuts to other programs just to cover those spending increases.
The cost of state employee benefits grew by 10 percent from 2015 to 2016, as did payments for debt service, while revenues from taxes and fees were projected to grow only 2 percent.
And this kind of uneven growth is expected to continue, which is one of the reasons Standard & Poor’s changed its outlook on Connecticut’s debt from stable to negative this week. When announcing the change, the company cited “weak revenue growth,” and a budget that is “under pressure,” even as the nation enters a period of economic growth.
Just for the record — border casinos are not the answer to our revenue woes.
There are murmurs, rumblings, that maybe another income tax increase is in order to close the budget gap. This would be devastating to the state’s economy.
Look at what happened after the 2011 tax increases. They did not put the state on a path to fiscal stability. They made our tax structure even more dependent on the highly volatile income tax, putting us more at the mercy of the swings of the market.
If lawmakers want to raise income taxes, they’ll also have to get a budget through the statehouse that is over the spending cap. It is unlikely they have the votes to do that, as it takes a 3/5 vote of the legislature to approve spending over the cap.
Democrats make up less than the 60 percent threshold, so even if they were to get every single member of their caucus to vote in favor of spending over the cap, they would still lose the vote if Republicans held the line.
The responsible thing to do is to start working now on making structural changes to the budget. State employees must be asked to assume some of the growing cost of their benefits. As the growth in state employee pay continues to outpace revenue growth — the payroll grew 4.5 percent from 2015 to 2016, which includes both pay and step increases — the state will either have to shrink the number of state employees and/or privatize more services.
Lawmakers also should adopt the plan put forward by State Comptroller Kevin Lembo. Earlier this year, Lembo proposed strengthening the state’s budget reserve fund — also known as the rainy day fund. Under Lembo’s proposal, if the state received windfall revenues in a given year from individual or corporate taxes — the two most volatile sources — an automatic trigger would send those excess revenues into the rainy day fund.
Lembo’s proposal not only makes sense, it could provide a measure of stability that is currently missing from our fiscal structure. But no legislators have introduced his proposal as a bill.
They should. And they should also stick to the spending cap, and try to close this year’s budget gap without raising taxes. It’s a tall order, but it’s the responsible thing to do.
Suzanne Bates is the policy director for the Yankee Institute for Public Policy. She lives in South Windsor with her family. Follow her on Twitter @suzebates.
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