(June 15, 2009) State lawmakers went into special session in the early morning hours of Thursday, June 4, to try to reach an agreement with Gov. Rell on a new, two-year state budget. The reality is that most of the negotiations will be accomplished by a smaller group of legislative leadership and the governor’s office, with everyone called back to Hartford once a budget is in sight.

So far, indications are that an agreement is not close, although it is possible lawmakers could be back next week to act on several budget-related issues. Even so, negotiations could continue beyond the beginning of the new fiscal year on July 1. If that happens, the state will continue to run, as it has, on this year’s budget.

While the “arrival date” of a new budget is unknown, what is certain is that Connecticut’s budget crisis never went away during the five months of the legislative session.

Lawmakers still face a daunting challenge that includes a budget gap of approximately $8 billion for the next two fiscal years and an estimated deficit as high as $900 million for this fiscal year. Meanwhile, all types of state revenue receipts have fallen significantly from previous years’ levels. We’re now officially between a rock and a hard place.

Job No. 1 is for legislators and the administration is to create a balanced budget that promotes economic growth and avoids tax increases that would further damage our economy and cost more jobs. The budget should also contain spending cuts that will make state government smaller, less expensive and better prepared to meet the challenges of the future.

Those “work orders” came directly from Connecticut residents and businesses, who in several statewide polls this year sent a pro-jobs, pro-economy message to lawmakers. Conducted by Quinnipiac University and Zogby International, the polls confirmed that people are most worried about jobs and the economy and they want state lawmakers to address both.

Lawmakers have many decisions to make as they craft a new state budget. Probably the biggest overall decision is whether the new budget will help the economy recover by enabling businesses to create jobs and increase their investments in Connecticut. Or, will the budget contradict those goals by increasing tax burdens and further weakening a struggling economy.

Earlier this spring, the Appropriations and Finance committees approved a Democratic tax-and-spending package that would raise taxes by more than $3 billion over the next two years and includes, among other things, measures to reduce corporate tax credits, end sales tax exemptions and sharply increase personal income taxes. Businesses quickly and strongly responded that those actions would essentially stop much-needed economic activity and put more jobs in danger.

Before the end of the regular session, both Gov. Rell and Republican lawmakers put no-tax-increase budget proposals on the table that included significant spending cuts and a downsized state government, but Democratic leadership rejected them.

Connecticut has a great opportunity to create a competitive advantage by avoiding what neighboring states such as New York and Massachusetts are trying to do—tax their way out of big budget deficits. It didn’t work for this state in the early 1990s, and it won’t work now. A strong economy—not bigger state government—can produce jobs, stability and the tax revenue needed to provide the services people and communities need.

For more information about the state budget, contact CBIA’s Bonnie Stewart at 860-244-1925 or bonnie.stewart@cbia.com.