Spending Cap Exemptions Threaten Fiscal Stability

Holding the line on spending cap exemptions is critical to restoring fiscal stability in Connecticut, the state’s Spending Cap Commission was told at its October 5 hearing.
“The state’s constitutional spending cap must be comprehensive, as the constitutional amendment envisioned,” CBIA assistant counsel Louise DiCocco told the commission.
In 1992, voters overwhelmingly approved a constitutional amendment adding a spending cap, intended to offset the widely unpopular state income tax passed by the legislature the previous year.
It was designed as a tool to keep most budget appropriations in line with actual personal income increases and inflation, but it hasn’t worked well recently.
While Connecticut’s population has grown just 9% since 1992, and inflation has risen 67%, state spending has skyrocketed by 201%.
A big part of the problem is that the legislature has not fulfilled key statutory requirements of the spending cap amendment: defining “general budget expenditures” and how personal income growth and inflation should be measured.

‘Creatively Redefining’ the Cap

The result, said DiCocco, is that some legislators have worked to “move state spending out from under the cap by creatively redefining it, thereby weakening it.”
In 2014, for example, payments to fund state employee pensions and post-retirement health benefits—a significant chunk of the state budget—were taken out from under the cap.

In fact, the original intent of the cap’s architects was to have those payments fall under the cap, but they didn’t specify it in the original language because they didn’t think it was necessary to explicitly say so.
DiCocco points out that the cap is designed to be flexible when necessary; it exempts funds designated for debt service, grants to distressed municipalities, funding for the first year of a federal mandate or court order, and spending needed for emergencies declared by the governor (subject to 60% approval by the legislature).

Broader Impact

Created during last December’s special budget session, the 24-member Spending Cap Commission is charged with developing the definitions missing from the cap’s language, which DiCocco said will “ensure fiscal responsibility” and “have a significantly positive impact on businesses’ willingness to invest here.
“Defining exemptions in a way that predictably and sustainably controls state spending will ultimately encourage economic investment and increase business confidence and job creation.”
The commission is chaired by former state budget director William Cibes, Jr., and former state representative and Finance Committee chair Pat Widlitz.
The group is required to present its final recommendations to the General Assembly by Dec. 1, 2016.

Make Your Voice Heard

If you would like to have a say in how your tax dollars are spent and help end the cycle of state budget deficits followed by tax increases, plan to attend one of the public hearings the commission is holding to get your input on what parts of the budget should fall under the cap.
The following hearings run from 4 to 7 pm:

• Thursday, October 13 | Bridgeport (4^th Congressional District)
  City Council Chambers, Bridgeport City Hall
  45 Lyon Terrace, Bridgeport
• Wednesday, October 19 | New Haven (3^rd Congressional District)
  Location TBA
• Wednesday, October 26 | Windham (2^nd Congressional District)
  Location TBA
• Wednesday, November 16 | Waterbury (5th Congressional District)
  Location TBA

If you are unable to participate in person, you may submit a statement through email to the commission (please copy CBIA's Louise DiCocco).

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For more information contact CBIA’s Louise DiCocco (203.589.6515) | @LouiseDiCocco