Letter from Hartford: The governor’s budget proposal as policy

As a member of the Appropriations Committee, I’ve just spent two weeks examining Gov. Malloy’s 2014-15 budget proposal by attending state agency presentations every day and public hearings every evening. As always, this budget sets policy, and a clear picture of those policies emerged from the process.

Connecticut’s deficit and job numbers tell us current policies affecting financial sustainability and economic growth haven’t been successful, but this proposal maintains them. It introduces new policy, however, by expanding executive branch authority and changing the roles of various levels of government.

The state continues spending more than it collects, even after the largest tax increase in its history. A month after the legislature convened in December to close a $365-million current deficit, a new $140-million gap appeared. While the administration had projected a year-end influx of tax revenues from bonuses and investment gains, Revenue Services Commissioner Kevin Sullivan told the Finance Committee last week it hadn’t materialized, saying, “Don’t balance the budget on it.”

With the current situation still unresolved, the state faces a $2.5-billion deficit for the next biennium, and the administration doesn’t propose to change course. It increases spending by 9.7%, or $1.8 billion, staying under the state spending cap only because it redefines the cap to exempt $900 million of spending. It pays for the spending by borrowing, taxing, and postponing debt obligations.

Since it makes no structural budget changes, the proposal perpetuates the deficit cycle and piles on future debt costs to jeopardize the state’s long-term ability to pay for services. This is not sustainable policy.

Regarding economic growth, Connecticut’s workforce declined last year by 51,000, or 2.68%, more than any other state, and its unemployment rate remains above New England and national figures. Current policies of spending on selected companies and industries to stimulate job creation have not been effective. Spending, however, remains a linchpin of the administration’s economic growth policy: fostering job creation is the rationale for nearly $2 billion in new bonding.

The proposed budget also extends three tax measures scheduled to sunset this July: the corporate tax surcharge, the electricity generation tax, and the insurance premium tax credit cap. This will disappoint business people considering growth, who stress that they value consistency in tax and regulatory policy above all else.

To evaluate spending allocations, legislators must know what they are. In many sections of this proposal, we don’t.

Many line items traditionally presented separately are collapsed into catch-all accounts. It’s impossible to tell how much the administration recommends spending on these programs and services. Particularly conspicuous examples are in the Departments of Education and Children and Families budgets.

Legislators from both parties became increasingly frustrated as we questioned state agency heads. Appropriations Co-Chair Sen. Toni Harp (D-New Haven) spoke to the Public Health Commissioner: “Most of the collapsed line items were legislative, not executive branch, initiatives. It seems like a way to ignore the initiatives of the General Assembly, and we do have a balance of power in our country and our government. This budget flies in the face of that.”

By limiting transparency, the proposal limits the General Assembly’s authority. To preserve its representative role, legislators need full disclosure.

The proposal also changes the way state funds are allocated to municipalities, removing their authority to use funds that were previously minimally or not restricted. It eliminates Municipal Revenue Sharing and Manufacturing Transition grants and most Mashantucket Pequot/Mohegan grants. It transfers PILOT funds to the Education Cost Sharing account, and doubles Town Aid Road funding.

While “hold harmless” grants compensate towns that would otherwise receive less overall than previously, the changes still force municipalities to spend more of their state funding on education and infrastructure and less on operating expenses. This diminishes the traditional autonomy of Connecticut’s towns.

Another proposal eliminating much of the car tax — a potentially workable idea under different circumstances — would decrease municipal revenues, forcing towns to make difficult cuts and/or raise property taxes.

Now the legislature must address these policy concerns. As we seek a sustainable course for Connecticut’s finances and economy, I hope everything will be on the table, including renegotiating state employee agreements that haven’t delivered promised savings, paying down debt and unfunded pension liabilities, and creating a better tax and regulatory climate for all businesses. And I hope all legislators will work together to preserve the integrity of the relationships among our different levels of government.

Ms. Lavielle represents Wilton, Norwalk and Westport. She is ranking member of the General Assembly’s Commerce Committee and a member of the Appropriations Committee.