Revenues Fall, but Proposals Increase State Spending

With the tax well running dry, now is not the time to open the state spending spigot wider.

But that’s the paradox facing state lawmakers and taxpayers as the latest projections for the next two fiscal years show revenues falling $500 million short of earlier projections.

According to the state’s latest report, revenues will fall short by $259 million for fiscal year 2014 and by $229 million in fiscal year 2015, mainly due to expectations of weaker personal income and sales tax receipts.

The problem is, budget proposals from both Governor Malloy and the Appropriations Committee increase state spending by close to 10% over the biennium—and they don’t account for the latest shortfall estimates.

What’s more:

• Both proposals are based on the assumption that the legislature will change the state’s constitutional spending cap to allow for spending increases.
• If the spending cap changes aren’t adopted, says the Appropriations Committee co-chair, the committee’s budget is over the cap by $500 million.

Balancing a new state budget is now a much more difficult task for policymakers as the legislature heads for adjournment on June 5.

While the proposed budget numbers just don’t work, additional tax increases would only further weaken Connecticut’s economy—with a jobless rate stuck at 8% and fewer than half of those who lost their jobs in the recession back at work.

That’s why it’s ironic—and unfortunate—that with revenues declining, the proposals push state spending even higher and seek to change the rules to enable budget increases.

Lawmakers are considering a proposal (HB 6352) that would modify the spending cap for two reasons: to allow extra spending so that the state can meet new obligations under the federal Affordable Care Act; and to exempt spending on state debt for teachers’ and state employees’ retirement accounts.

But the latter is an exemption that was specifically ruled out by the cap’s authors when they brought it to voters in 1991. Lawmakers didn’t consider it prudent budgeting and wanted to discourage it in the future, so they made sure it came in under the cap.

Changing the constitutional spending cap will require three-fifths approval of both the state House and the Senate.

Different Way

State spending has soared 153% over the past 20 years, far outpacing household income, the inflation rate, and Connecticut’s population growth.

Lawmakers should move in a different direction. More than ever, they need to set more realistic budget priorities, fund only those programs with proven track records, and lean the cost of delivering public services.

There’s no better economy-driving, job-creating program available to lawmakers than delivering a balanced budget that doesn’t increase taxes or extend those due to expire. That economic boost would create additional tax revenues needed to offset future deficits.

What’s necessary now is keeping spending within our means and using taxpayer dollars more wisely.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.