Everyone will be at the negotiating table and all suggestions—except tax increases—are welcome in bipartisan talks Gov. Malloy is convening to close a new state budget shortfall and position the state for future economic growth.
The talks, which begin on Monday afternoon, could lead to a special legislative session this year on the budget.
A new report from the governor’s budget director shows a $118 million budget gap that comes fast on the heels of a $103 million shortfall the governor had already patched with several budget cuts.
Gov. Malloy opened the door to money-saving ideas from both Republicans and Democrats that would help close the latest gap, shore up Connecticut's long-term finances, and boost the state’s economic competitiveness.
“Everything’s on the table,” he said, including specific spending cuts and possible state employee concessions. But the governor, who will unveil his budget priorities next week, said the discussion exception is tax increases.
“Governor Malloy has created the right sense of urgency by calling for this bipartisan meeting of the minds at the Capitol,” said CBIA president and CEO Joe Brennan.
“The times demand an open, candid discussion on the budget and legislative leaders of both parties need to work in a bipartisan fashion to build consensus on the policies Connecticut needs to fuel consistent job and economic growth.”
Places to start
Policymakers looking for ways to plug the $118 million gap and put the state on better fiscal footing would do well to adopt recommendations made by the Connecticut Institute for the 21st Century that could save many times that amount.
In fact, the Governor’s Second Chance Society initiative, along with changes in long-term healthcare, are examples of the types of sustainable reforms—including corrections, social services, local governance, technology, and others—the Institute says could save state tax dollars and deliver better services.
What’s more, lawmakers should explore restoring state tax policy that for years has successfully generated jobs, economic growth and tax revenues.
“Tax policy is not a zero-sum game,” said Brennan. “Research and development tax credits, for example, generated a more than double average return on investment for the state since 2000.”
However, when lawmakers clipped the R&D credit—and all state corporate tax credits—they made them much less potent.
Policymakers aren’t the only ones seeking economic solutions.
- Last week, CBIA joined representatives of the Connecticut Conference of Municipalities and the state AFL-CIO in announcing a summit to brainstorm the best pathways to a brighter economic future. The Nov. 12-13 gathering will focus on critical issues as taxes and regulations, education, transportation, and quality of life.
- Members of CBIA’s Tax Committee recently met with the State Tax Study Panel and the Commission on Connecticut's Leadership in Corporation and Business Law to present more information about aspects of state tax policy that have helped both build Connecticut’s economy and generate revenues.
- The legislature earlier this year required the state’s Office of Policy and Management to study the recommendations of the Connecticut Institute for the 21st Century. OPM must report back to the governor and the legislature’s budget-writing committees by Feb. 1, 2016.
Connecticut’s economy continues to face challenges that are impacting the state’s finances.
Recent Wall Street downturns have reduced expected tax revenues to the extent that the state is experiencing recurring shortfalls.
And a string of five consecutive months of job growth in Connecticut came to an end in September.
Connecticut has regained 83.6% of the 119,000 jobs lost during the Great Recession of 2008-2010, while the U.S. passed the 100% mark in May 2014 and has now regained 140% of recession losses.
Meanwhile, most Connecticut voters say they are concerned about the state's economy and business climate, according to the latest Quinnipiac University Poll.
Three-quarters of voters surveyed by the Q-Poll described the state's economy as "not so good" or "poor" (an 11-point jump since March), with just 24% saying it was good.
A third of those surveyed said the economy was the most important problem facing Connecticut today; 28% identified taxes as the biggest issue; 11% said it was the budget; 4% said education; and 3% said transportation.