Aggressive Action Needed on Fiscal Front

10.01.2010
Economy

Facing daunting, long-term challenges to its financial health, Connecticut needs to take bold steps to cure its fiscal ills and promote a stronger economy. Several experts rallied around this tenet in a panel discussion during The Connecticut Economy Conference in Rocky Hill last month. The conference was presented by CBIA, the Hartford Area Business Economists, and the Barney School of Business at the University of Hartford.

Fergus Cullen, executive director of the Yankee Institute for Public Policy, proposed ways that policymakers can create growth in our state and stop the drain of “economic and social capital” that occurs when people migrate to other states.

“Policymakers can’t affect all of the factors that cause people to leave this state,” Cullen acknowledged, but one of the most important actions they can take is to “reduce state spending” and ease the tax burden.

“The top 6% of taxpayers in Connecticut pay more in taxes than the bottom 94% combined,” he said. The state is dependent “on a very thin slice of taxpayers”_ geographically highly concentrated [in Fairfield County]. Look at New Jersey and California. That’s the future of Connecticut if we don’t make structural changes to government spending.”

Two Key Areas for Reform

Jim Torgerson, president and CEO of UIL Holdings Corp., said that substantial savings in taxpayers’ dollars could be realized through an overhaul of Connecticut’s prison and long-term health care systems. Torgerson is chairman of the steering committee of the Connecticut Regional Institute for the 21st Century, which researches and recommends long-term strategies for keeping the state economically competitive.

Since 1990, he said, expenditures for Connecticut’s Department of Corrections have gone up 280%. Finding ways to “deliver services more effectively and more cost-effectively,” he said, will be key issues for Connecticut’s new governor, along with greater government accountability, regionalization of services, and better ways of tracking data on state spending and outcomes.

Brian Renstrom, a partner with BlumShapiro, Connecticut’s largest regional accounting firm, said that his firm and the Connecticut Regional Institute for the 21st Century “did a deep dive” into two major areas of the budget: the justice system and long-term care: to see how state spending could be reduced.

“Medicaid is the primary payer in [the long-term care] system, accounting for 13% of our total state budget,” he said, adding that institutional (nursing home) care accounts for 65% of the Medicaid budget. According to the Institute’s reports, a large number of Connecticut residents could benefit from affordable community-based services that allow for care at home versus in a nursing home, but the process of obtaining a waiver for such services is complex and prohibitive.

“Our state ranks 34th in the nation in its ratio of long-term care versus community-based care,” said Renstrom. “Connecticut needs to rethink its strategy regarding long-term care to achieve the 75-25 split that is our goal.” That shift, he said, would bring $900 million in year-over-year savings, while the status quo (having nursing homes as the first and last care provider) could come at the staggering cost of $3.5 billion a year as Connecticut’s population ages.

Another cost burden that the Institute says could be substantially reduced without sacrificing public health or safety is the level of spending on the Department of Corrections and the judicial system in charge of probation. Spending totaled $700 million last year, according to Renstrom, 58% of which he said was wages.

The Institute’s recommendations for reforming the state’s correctional system: including better measurement and modern, consistent information tracking: are available at ctregionalinstitute.org.

Lesia Winiarskyj is a writer/editor at CBIA. She can be reached at lesia.winiarskyj@cbia.com.

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