A new fiscal year worse than last, but we can still fix Connecticut’s mess

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As a member of the Finance Committee, I participated in my sixth annual joint Appropriations and Finance Committee Fiscal Accountability Meeting last week to discuss our continuing budget woes. Here’s where we are:

Looking backwards, FY 2016 was another fiscal disaster. 

Connecticut began 2016 with more structural deficits coupled with a refusal by the majority to address the size and burn rate of our bloated state government.  Instead, they blamed our chronic fiscal problems on a “new economic reality” — i.e., more political spin and another pusillanimous excuse for failed leadership.  Indeed, despite record high state tax receipts over these last few years, extracted by our record high tax increases, we still have not kept pace with spending.

We thus ended the legislative session without a budget, forcing us to return for special session to address the emergency.  To patch the structural funding holes, the majority slashed funding to schools, hospitals and social programs and then ran to summer break claiming that all was balanced.  Sadly, we still ended the year with a $170 million deficit, which had to be withdrawn from the Rainy Day Fund.

Going forward, things look worse.

For the next biennium, our budget deficit has grown from $1 billion last year, to $1.3 billion before the election, to now more than $1.5 billion and growing.  These fluid numbers derive from a shrinking tax base, coupled with an institutional refusal to recognize our reckless spending problems.

Indeed, as I reported last May, the majority party actually pushed through a bill last session to require the nonpartisan Office of Fiscal Analysis (OFA) to change their budget accounting methodology to the same essential methodology used by the partisan Office of Policy and Management (OPM).

This new degraded system artificially masks current and future deficits because, among other issues, OFA and OPM must now project spending differently than the way they project revenue.  Going forward, we will thus be forced to decipher between two (or more) different sets of budget projections to get the real numbers – e.g.:

New Projection Methodology   Former Methodology
Projected Deficit (in millions) Projected Deficit (in millions)
FY 17 FY 18 FY 19 FY 20   FY 17 FY 18 FY 19 FY 20
(77.5) 84.4 50.2 (77.5) (1,452.6) (1,622.8) (1,913.6)

 

Notably, for budget deficit calculations, the majority wants to use a spending methodology that keeps deficits low on paper.  For spending cap calculations, however, they want to use the old methodology which will allow them keep the spending cap high! Only in Hartford.

Regardless, the current numbers tell the real story of our continuing fiscal imbalance and decline.  Revenue from personal income and sales tax is down $45.9 million this year alone, and this upcoming year’s spending is projected to increase by $54.3 million.

Regardless of what methodology is used, all acknowledge that spending needs to be cut drastically this year to balance the budget, and that more tax hikes and/or cuts to education and social services are coming.  Once again, bad fiscal policy will lead to poor public policy.

We can still fix this mess.

Years of fiscal mismanagement by the majority have led us here, so years of fiscal discipline can and will lead us out.

We need to shrink the size and burn rate of our bloated government, and move away from a 50,000-plus state work force.  Not-for-profits and the private sector can deliver many of the services covered by union contracts for nearly half the price.

More importantly, a stable tax and regulatory structure will foment growth, and return the tax base, promise and prosperity to our state.  Our constant changes to rates and rules have undermined confidence, and driven employers and investors large and small away from Connecticut.

Still, I am optimistic that we can change direction and improve the future for everyone.  While I will not be returning to the General Assembly next year – I did not run for State Rep again to run (unsuccessfully!) for U.S. Congress – the landscape and leadership in Hartford is moving in the right direction.

I look forward to my last month in office, and continuing my service to Connecticut elsewhere in the future.  I thank everyone in my district for the honor of serving them for the last six years.

More to come.

State Rep. John Shaban is a Republican representing the 135th House district of Easton, Redding and Weston.

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