Governor Malloy wants to dramatically change how the state budgets, to “reset our expectations of what we can afford, how we provide services, and how we save for our priorities.”

Change is imperative to help “create a more sustainable and enduring economy” in Connecticut,” he said.

Budget-Gaps_031816Reshaping the state budgeting process was the centerpiece of the governor’s State of the State Address this week at the open of the 2016 session of the General Assembly.

No longer can the state “wrongly assume government can do everything it does now, regardless of ever-growing costs,” said Gov. Malloy. “It just isn’t sustainable.”

Just as businesses and families have adapted to the changing realities of a tough economy by spending only what they can afford, said the governor, so now must state government.

CBIA Agrees

CBIA believes the governor’s budget proposals outline the tough, necessary changes Connecticut needs to resolve its fiscal issues and build a strong, competitive economy.

“We no longer have a choice,” said CBIA president and CEO Joe Brennan. “This is what the state’s fiscal condition demands.

“The Governor’s responding to what he’s hearing from residents and large and small businesses, that government must change the way it operates if Connecticut’s going to see strong, vibrant economic growth.”

New Reality

State lawmakers will be in session from now until midnight, Wednesday, May 4, to consider myriad issues but most important, the governor’s $19.87 billion budget revision.

Connecticut faces a budget deficit of at least $7 million for this fiscal year and approximately $550 million in the next, plus billion-dollar deficits in funding for state employee retirement benefits.

Gov. Malloy’s proposal would cut 5.75% from all agency discretionary budgets and overall reduce state spending by $570 million in the next fiscal year, a budget cut of 2.8% from what had been approved.

He said the state’s workforce would have to be reduced by more than 1,000 through attrition “and other means.”

But the governor went far beyond the revised budget numbers to call for a major overhaul of how the state works and budgets.

Five Principles

He outlined five principles to change the way the state budgets--reforms that reflect sentiments expressed by the state’s business community--including:

  • Limiting spending to available resources by abandoning the “current services” system of budgeting which automatically funds every activity or line item previously funded, with inflation increases, every year. “Autopilot” spending increases, said the governor, “must end, and ... must end this year.”
  • Reforming the funding of long-term state employee pensions and other retirement costs
  • Defining state government’s “core services” to prioritize state spending. “Core services cannot comprise every single line item,” said the governor.
  • Holding state agencies accountable for results, by focusing on outcomes and cost-effectiveness
  • Holding bipartisan budget talks, and “get[ting] it done early. We welcome anyone to that table,” he added.
This budget is based not on how much we want to spend, but how much money we actually have to spend.
— Governor Dannel Malloy
He made his budget proposal based on using an approach similar to zero-based budgeting and limiting spending to actual revenue projections.

“This budget is based not on how much we want to spend, but how much money we actually have to spend,” he said.

Spending Cap, Debt Refinance

Among other things, the governor wants to:

  • Enact the state spending cap approved by taxpayers in 1992
  • Enact a transportation funding lock box
  • Refinance state employee pension debt, reducing the expected rate of return on those funds, and changing the expensive Tier One plan to a pay-as-you-go system
  • Hold “necessary discussions between labor and management” to explore other changes to state employee retirement benefits “based on what we can afford, not what we previously spent.”
  • Make state spending more transparent by posting detailed information from state agencies online

In order to accomplish all of these changes, said the governor, “everyone must be willing to compromise.”

Changing Realities

The governor said there is “a new economic reality” and “visceral feeling that our country and our state are not going back to how things were before the Great Recession.”

He acknowledged that Connecticut businesses “are making different decisions about how they hire, and the benefits they offer. They’re looking at new technologies to fundamentally change how they operate, because if they don’t, they won’t survive.”

While the state has started to make some incremental improvements in how it operates and budgets, “it’s clear that our work is not done."

“We have to adapt even more,” he said. State government must “reset our expectations of what we can afford, how we provide services, and how we save for our priorities.”

Turning Point

“This is a critical turning point for Connecticut,” said Brennan.

Connecticut has made progress creating jobs and attracting businesses, but “not enough to sustain and support state programs and services and keep jobs and families in Connecticut,” he added.

“Lawmakers must come together and support real, long-term reforms so Connecticut can meet the competitive demands of a 21st century economy.”

And they will now start the process of refining the revised state budget through the Appropriations and Finance committees.

For more information about state spending, email or call CBIA’s Louise DiCocco (203.589.6515) |

For more information about state taxes, email or call CBIA’s Bonnie Stewart (860.944.8788) | @CBIAbonnie