Ratify the Cap

11.20.2015
Issues & Policies

Until the General Assembly finally adopts the state’s constitutional spending cap, says Attorney General George Jepsen, it has and “will continue to have no legal effect.”
Mediabakery_IMZ0010010_MEDVoters in the state overwhelmingly approved a spending cap in 1992 as part of a compromise that also introduced Connecticut’s personal income tax.
Yet ever since then, lawmakers have avoided formally ratifying the cap into law, by a requisite three-fifths vote.
Hence the attorney general’s opinion that the unfinished legislative business makes the cap legally moot.
And that’s a concern to Connecticut taxpayers of all types.
“Fiscal stability and predictability are inextricably linked with the business confidence necessary for investment, economic growth, and job creation,” said Joe Brennan, CBIA president and CEO.
“An effective, workable state spending cap is a crucial component to achieving that goal.”
How it happened
In the late 1980s, Connecticut was in the midst of both a major spending binge and a new and deep recession.
Double-digit percentage increases in state spending were routine in the 1980s—with an average growth rate of 11% during the decade.
Massive state program expansions fueled the spending hikes, produced a mountain of state liabilities, and created the state’s first billion-dollar budget deficits in the early 1990s.
Taxpayers demanded a way to keep state spending within their ability to pay for it.
A compromise was reached in which the unpopular state income tax came with the very popular spending cap and other big strings attached—such as biennial budgeting, mandatory five-year revenue forecasting, the governor’s rescission authority, and reorganizations within state government.
Loud and clear
In a very loud statement, more than 81% of Connecticut residents approved the spending cap in 1992 in the deal that included the income tax.
The cap ties state spending to the growth in personal income in Connecticut—as determined by the greater of the current of rate of inflation or five-year average of the annual personal income growth for the state (as compiled by the federal Bureau of Economic Analysis).

CBIA president & CEO Joe Brennan

An effective, workable state spending cap is a crucial component for investment, economic growth, and job creation.

The cap and the tightened controls helped put Connecticut back on a sounder fiscal foundation, restrained the growth of state spending, and over the years even produced periodic surpluses that were used for significant state projects.
Best of all, Connecticut’s individual taxpayers and businesses were right on the money—the cap restored business confidence in the state and produced a renewal of economic growth and job creation.
Yet, over the 20-year history of the spending cap, it hasn’t stopped the state budget from growing, but it has slowed it down.
Going around
In recent years, lawmakers have approved major exemptions of state spending from the cap.
Governors Rowland and Rell both asked for emergency exemptions from the cap to balance the state books.
And in 2013, Gov. Malloy asked for, and received, a modification of the cap to allow for new requirements the state is facing under the Affordable Care Act.
That’s the kind of exception that was envisioned, and exempted, when the cap was adopted.
But the governor also asked to exempt $500 million in spending on state debt, for teachers’ and state employees’ retirement accounts off the General Fund books—not what the cap’s creators envisioned.
This year, lawmakers once again “reinterpreted” the cap to move more spending off the books.
CBIA supports formally ratifying the cap into the state constitution, and restoring it to its original design and intent.
For more information, email or call CBIA’s Bonnie Stewart (860.244.1925) | @CBIAbonnie

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