Letter from Hartford: State climate must be conducive to business and job creation

Thanksgiving is past and it’s beginning to look a lot like … a special session.

It was widely assumed the Connecticut House and Senate would not convene again until the beginning of the regular session on Jan. 9, 2013.

Then the budget crisis reappeared.

In spite of a record $1.5 billion in new taxes imposed in 2011, we now have a likely shortfall of more than $360 million for the current fiscal year and a projected deficit of $1.1 billion for the fiscal year beginning July 1, 2013. The primary cause is a dramatic drop in anticipated revenues as Connecticut’s recovery lags behind even the halting national economy. Our total revenues this year would be worse but for an extra $130 million-plus in federal aid to help us pay for a surge in demand for Medicaid services. If the deficit exceeds 1% of the current budget on Dec. 1, as appears likely, our law requires that a deficit mitigation plan be adopted. Thus the need to reconvene the legislature.

If we are in fact called to a special session before Jan. 9, it will be a convocation of the old legislature and not include members-elect newly chosen on Nov. 6, 2012. So those of use who are lame ducks will flap back to answer the roll in Hartford for what has to be the very last time. The political composition remains essentially unchanged anyway by the election, with Republicans down 99-52 in the House and 24-12 in the Senate.

Mitigating the deficit presents a serious challenge. The last solution included a deal with state employees that secured concessions in exchange for a guarantee of no layoffs for years. So reducing the workforce is pretty much off the table absent contract renegotiation.

In a recent letter to legislators, Gov. Malloy stated that another tax increase would not be part of resolving the deficit. If we rule out raising taxes to increase revenue, that is likely to leave us with the alternative of a reduction in spending. Reducing spending would be severe shock therapy for a state that relentlessly boosts spending each year and routinely spends more than we can afford.

Spending could be better contained as the Republicans demonstrate each cycle by proposing an alternative budget, but undeniably Connecticut faces structural problems in bringing down its spending. Our small state of three and a half million people includes three of the poorest cities in the country. As exemplified by the accelerated growth of Medicaid costs, Connecticut has more and more people who need government help. At the same time we are not generating jobs and creating taxpayers who will pay for that help.

Our population is also aging, creating more needs, and able workers are being lured elsewhere. Figuratively, we are loading more on the wagons with fewer horses to pull the wagons.

So, if we can’t cut spending enough or further tax our people, we need to generate revenue by increasing wealth. Not necessarily millionaire wealth, but the taxable wealth that comes from a good job. Simply stated, we need a climate in Connecticut conducive to business and job creation such as we haven’t seen in a generation. Nothing will accomplish this goal short of major reform in our tax policy as well as our regulatory and legal environment. That is a tall order with plenty of political risk. It would be more possible if there were bipartisan participation which, in itself, is hard to achieve with a legislature so out of political balance. There was never a clearer need, and after all, this is the season for miracles.

State rep. John W. Hetherington is a Republican who represents Wilton and New Canaan.