One of the keys to driving Connecticut’s economy and job growth is getting the state’s fiscal house in order. Confidence in state government to budget wisely and to effectively manage its finances will encourage businesses to create jobs and increase their investments in the state. 

This week, the legislature’s Appropriations Committee held a public hearing on several proposals to restore fiscal responsibility and increase transparency in government. CBIA Economist Pete Gioia testified before the committee to support many of the reform proposals.

SB 229, for example, calls for state lawmakers to review and approve all collective bargaining agreements for state employees--a commonsense change that Governor Malloy also has called for in his package of budget reforms (contained in SB 1000).

Gioia said that SB 229 could in fact be “substantially enhanced” by adding more of the governor’s recommendations from SB 1000, including:

  • Allowing the governor to present a budget for all state agencies, including the judicial system and watchdog agencies
  • Expanding the governor’s rescission authority to 10% of any appropriations and to 5% of any fund
  • Adopting Generally Accepted Accounting Principles (GAAP) for state budgeting
  • Directing state budget surpluses to be used to reduce the state’s unfunded liabilities
  • Providing expanded transfer authority in the Finance Advisory Committee process
  • Bringing more agencies into CORE-CT, the state’s financial and human resources system

Had these changes been in place before the recession began in 2008, remarked Gioia “perhaps we’d all be dealing with a fiscal problem a lot smaller than a $3.2 billion deficit.” CBIA has supported these measures since they were introduced in the governor’s budget proposal and has encouraged the committee to modify SB 229 to include them.

GAAP accounting

Several other Appropriations Committee proposals also would convert state budgeting to GAAP. Immediately after his swearing-in last January, Gov. Malloy signed an executive order to begin the process.

Currently, Connecticut uses a modified cash system of accounting. Among other things, it allows the state to incur expenses in one fiscal year but pay for them in the following fiscal year. --a very opaque system that tends to hide the state's true fiscal picture.

On the other hand, GAAP is fully transparent. It demands that expenses incurred in one fiscal year by paid for in that year. It also provides a greater level of confidence in Connecticut to rating agencies assessing the financial condition of the state.

Rainy Day Fund

Another group of proposals would increase the state’s Rainy Day Fund to hedge against future economic downturns. Proposals range from increasing the fund to 15% and as high as 30% of the overall state budget.

Moving to the 15% level might be acceptable, said Gioia, but a better strategy would be to support the governor’s call for expanded rescission powers. That would allow the governor to more effectively manage a budget crisis as it happened—rather than waiting for a reserve fund to plug the gap after the fact.  

Spending cap

CBIA also supported several proposals to legislatively implement the state’s constitutional spending cap. The cap was approved by voters in 1991, and upheld by an opinion of the state attorney general. But it was never finally ratified by the legislature. Doing so would help clarify the original intent of the cap to keep state spending within the means of Connecticut’s taxpayers.

For more information, contact CBIA’s Pete Gioia at 860.244.1945 or pete.gioia@cbia.com.