Gov. Ned Lamont this week promised dramatic cuts in state borrowing, pledging annual bond authorization reductions of almost $600 million.
"We cannot put Connecticut's future on the credit card," Lamont said Feb. 12 at a Waterbury Regional Chamber event in Southbury.
"The state has a problem putting costs on Connecticut's credit card that it simply can't afford to pay."
Lamont will deliver his much anticipated two-year budget proposal Feb. 20, with a projected $4 billion deficit expected to shape much of the governor's planning.
Connecticut averaged about $1.59 billion a year in bond authorizations between 2012 and 2019, with current obligations of $31.7 billion.
Debt service will cost the state $2.2 billion this fiscal year and is projected to rise 23% to $2.7 billion by fiscal 2022.
Lamont said his proposed budget will cut bonding approvals to $960 million a year, a 39% reduction from current levels.
"We've been on a bonding binge for a while," he said. "Now, we're going on a debt diet."
Connecticut's debt service to revenue ratio exceeds 13%, the highest in the U.S. and three times the national average.
Lamont believes his proposal could save taxpayers as much as $2 billion in debt service payments over the next decade.
"We do have a fiscal crisis and we are going to confront it head-on," Lamont said.
The governor canceled the January and February scheduled meetings of the state Bond Commission, saying Connecticut should limit its bonding agenda to critical needs.
Lamont's proposal will not impact bonding for transportation projects, which is supported through the Special Transportation Fund.
CBIA's Louise DiCocco said businesses welcomed the governor's proposal, calling it one of a number of critical steps needed to restore fiscal stability.
"This is great news considering that Connecticut owes more on the state credit card per resident than nearly every other state in the country," DiCocco said.
There will be some screaming and we don't have a choice. We're not going to rubber stamp everybody's bonding request.
Lamont expects push back from legislators over the bonding cuts.
"There will be some screaming and we don't have a choice," he said. "We're not going to rubber stamp everybody's bonding request.
"I think we've done that for a while and that's gotten us in trouble."
Sales Tax Expansion
Lamont did warn businesses leaders they won't like his two-year budget, saying he won't cut state spending as quickly—or by as much—as some in the business community would like.
But he did say he wanted the state to rely more on private nonprofits to provide certain state services.
He also released an open letter to state residents this week, telling them to prepare for a budget that will expand the sales tax, restructure state pension debt, and change delivery of state services.
"State government should be reflective of the needs of its residents, and it's my intention to do so while bringing Connecticut state government into the 21st century," he wrote.
Lamont also said he wants to avoid sales tax hikes, proposing an expansion of the tax base to include a number of current exemptions, including many services and digital products such as video streaming.
"Our economy has still not fully recovered from the Great Recession more than a decade ago, and we must be prepared for the possibility of another economic downturn," he said.
"Although we could use that surplus to balance next year’s budget, our fixed costs—the true culprits behind our continued deficits—are growing by hundreds of millions of dollars per year."