Letter from Hartford: We must regain control of our destiny
Before the year ends, our state government must close a current deficit of $365 million. But a much larger, structural deficit looms, along with the fundamental question of how much of its destiny the state of Connecticut controls.
The current deficit, a result of both revenue shortfalls and expense overruns, will be closed by a combination of executive and legislative action.
The governor has announced $170 million in cuts within the scope of his rescissionary authority. Allowing for overlap with existing contingency funds and federal revenue lost with the cuts, the legislature’s nonpartisan budget office has calculated that the rescissions will reduce the deficit by about $107 million.
This leaves a $258-million gap to be closed by the legislature, which should convene in a special session to take action before the holidays. I join my colleagues in the hope that ideas from the alternative no-tax-increase budget we proposed last year will be part of a bipartisan solution.
But the current deficit is just the tip of the iceberg. The 2014-15 biennial budget already has a built-in deficit of $2.2 billion. In other words, this is what we will have if there’s no change in policy for raising revenues or spending commitments.
As a member of the Appropriations Committee, I received this news formally in a joint presentation by the budget offices of the executive (OPM) and legislative (OFA) branches. Apart from the figures, perhaps the most disturbing aspect of the presentation was the argument, supported by the administration, that Connecticut’s financial situation is out of its own hands. OPM’s presentation stated: “Connecticut’s fiscal future will largely be determined by forces outside the control of state leaders.”
The presentation illustrated how the European debt crisis, the country’s slow recovery from the recession, the unpredictable resolution to the fiscal cliff, and the effects of implementing the Affordable Care Act create a climate of uncertainty.
It also showed that Connecticut is recovering more slowly than the rest of the country; that our tax revenues, which have underperformed budgeted projections, are volatile and highly reliant on investment income; that growth in costs of state employee post-retirement benefits is expected to outpace growth of both personal income and the Consumer Price Index; and that without policy changes, state expenditures are on a clear path to exceed by a substantial margin both revenues and the statutory spending cap for the next three years and beyond.
Given the gravity of the circumstances, this doesn’t seem to be the right moment to consign Connecticut’s fiscal future to the hands of fate. On the contrary, the governor and the General Assembly have a responsibility to do everything possible to bolster our state’s economy and strengthen its financial foundations to withstand whatever external developments send our way.
While tax increases and borrowing have long been the methods chosen by the legislative majority for closing our state budget deficits, those choices have placed the state on increasingly shaky financial ground. Significant revenue shortfalls this year and last showed how risky it is to rely on draconian tax increases in a foundering economy, particularly while increasing spending by more than 7%. We need to take a structural view and change the way the state does business.
We could start by becoming less reliant on volatile tax revenues by adopting tax and regulatory policies that will attract people and businesses in order to expand our tax base, and we must find a way to cut spending to levels that will allow us to do this while still providing essential services. Borrowing should be limited to capital projects. While the long-term contract signed with state employee unions makes it difficult to renegotiate compensation and benefits, that option should still be on the table.
It is ultimately up to the General Assembly to structure and vote on a budget. We can point the state’s future in the right direction if we leave no stone unturned and work together as a bipartisan, cooperative legislature. We must make Connecticut stronger than the forces besieging it, and restore to our state the ability to control its own destiny. The people of Connecticut deserve no less.
Gail Lavielle represents the 143rd District, which includes parts of Wilton and Norwalk and, in January, will also include part of Westport.