Budget Fix: Fourth Time’s a Charm?

Issues & Policies

In the 11 months since passing the 2016-2017 budget—featuring the second-largest tax increase in state history—lawmakers have acted four times to fix recurring deficits.
It’s been a frustrating game of Whack-a-Mole, with almost monthly new budget shortfalls illustrating the state’s inability to deal with its fiscal challenges.


State lawmakers will be dealing with billion dollar-plus budget deficits after the November elections.

This past Friday marked the latest chapter in the ongoing saga, when the House followed the Senate in approving a mitigation plan that closes a near $1 billion deficit for the coming fiscal year.
Friday’s House vote was close: 74-70, with eight Democrats joining all 62 Republicans present in voting no. Another seven House members were absent for the vote.
The Senate approved the plan—based on an agreement between Governor Dannel Malloy and Democratic leadership—Thursday on a 21-15 party line vote.
CBIA president and CEO Joe Brennan called approval of the budget deficit mitigation package “a first step in the long process of addressing Connecticut’s fiscal challenges.”
“While the plan does not contain as many structural reforms as we would like, the spending reductions are recurring and will significantly reduce the size of the projected shortfalls in future budgets,” he said.

Spending Cuts, No Tax Hikes

The latest budget fix includes no tax or fee increases, does not tap the state’s Rainy Day Fund, and cuts about $860 million in spending.
It also assumes the loss of as many as 2,500 state employee positions through attrition, retirements, and layoffs.

CBIA president and CEO Joe Brennan

We are still paying the price for last year’s tax increases that cost us much-needed investment and jobs.

Spending was cut by 4.4% when compared to the original two-year budget passed last June, a budget that sparked broad outcry from businesses, large and small.
That 2015 vote came just four years after the General Assembly approved the largest tax history in state history, fueling the cycle of deficits followed by tax hikes followed by more budget shortfalls.
“The cuts are real, and they are difficult, but necessary," Brennan said.
"They are necessary because we are still paying the price for last year’s tax increases that cost us much-needed investment and jobs.
“It is essential that the state continue down the path of fiscal discipline, because resorting to past practices will only lead to further erosion of our tax base."
The latest budget votes took place during an election year, with voters headed to the polls this November to elect candidates for all 187 General Assembly seats.

Structural Reforms Needed

The state's nonpartisan Office of Fiscal Analysis said the 2017 spending cuts will reduce projected deficits in 2018 and 2019 by more than 40%.
Nonetheless, after this year's elections lawmakers will still be grappling with a $1.3 billion deficit for 2018 and a $1.4 billion deficit the following year.
“Make no mistake—tax increases next year will be as harmful and ill-advised as they would have been this year," Brennan said.
“The next step is to aggressively pursue additional structural reforms to state government and to adopt effective measures that ensure Connecticut has a workable spending cap that helps avoid future fiscal crises."

Make no mistake—tax increases next year will be as harmful and ill-advised as they would have been this year.

Republicans were critical of the latest budget fix, as it did not include a number of key reforms, including a viable spending cap, state employee concessions, and mandatory General Assembly votes on state employee union contracts.
GOP lawmakers also wanted to cut the $11 million in public financing of campaigns for legislative candidates in this November's elections. That program survived the spending cuts unscathed.
The approved budget plan relies on a number of one-time solutions, including sweeps from other funds and off-budget accounts, and counts on enhanced revenues from lotteries and cigarette and alcohol taxes.
“If Connecticut’s economy is to reach its full potential, we must take the best ideas from Republicans and Democrats and have a legislature committed to fiscal discipline, economic competitiveness, and growth," Brennan said.
“We look forward to working with those policymakers who share our goals for Connecticut as we take on the challenges before us.”


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