Tough Reforms Good for State’s Economy, Fiscal Health

Issues & Policies

Tough times demand tough solutions, and this week, CBIA testified before the Appropriations Committee in support of the budget reforms proposed by Gov. Malloy that could go a long way toward putting Connecticut’s fiscal house in order.
CBIA economist and vice president Pete Gioia testified that Connecticut faces serious economic issues that not only impact state revenues but also impede business growth.
Gioia_021716But CBIA believes the governor’s budget proposals contained in HB 5044 outline the tough, necessary changes Connecticut needs to resolve its fiscal issues and build a strong, competitive economy.
The governor’s recommendations center on five main principles designed not only to change the way Connecticut budgets, but the way state government operates.
He made his budget proposal based on using an approach similar to zero-based budgeting and limiting spending to actual revenue projections—“not on how much we want to spend,” said the governor, “but how much money we actually have to spend.”
Gioia told lawmakers that that approach and the governor’s other reforms reflect sentiments long expressed by the state’s business community.
“If we show that we can put our fiscal house in order,” he said, “and that we’re serious about doing it, it will go far toward restoring business confidence.”
The governor’s reforms include:

  • Limiting spending to available resources by abandoning the “current services” system of budgeting which automatically funds every activity or line item previously funded, with inflation increases, every year. “Autopilot” spending increases, said the governor, “must end, and … must end this year.”
  • Reforming the funding of long-term state employee pensions and other retirement costs
  • Defining state government’s “core services” to prioritize state spending. “Core services cannot comprise every single line item,” said the governor.
  • Holding state agencies accountable for results, by focusing on outcomes and cost-effectiveness
  • Holding bipartisan budget talks, and “get[ting] it done early. We welcome anyone to that table,” he added.

If the state is going to reach its enormous economic potential, government must prove it can manage its finances in a sustainable way.

Some of the governor’s reforms push into new areas, but businesses are encouraging the state to also press ahead where it’s already succeeding—such as in long-term healthcare, Lean efficiency practices, and corrections.
Long-term solutions
Businesses, along with the Connecticut Institute for the 21st Century, have long advocated for sustainable spending reforms as a long-term solution to the state’s persistent fiscal troubles.
CBIA and its member companies have made it clear for years that if the state is going to reach its enormous economic potential, state government must prove it can manage its finances in a sustainable way.
Doing so will give businesses the confidence to remain in Connecticut and expand and grow jobs.
And more investment and well-paying jobs will generate the revenue necessary to underwrite core state services, such as education and transportation, that families rely on.
Changing realities
As the governor said, no longer can the state “wrongly assume government can do everything it does now, regardless of ever-growing costs.”
Just as businesses and families have adapted to the changing realities of a tough economy by spending only what they can afford, said the governor, so now must state government.
This budget is a big step in the right direction.


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