Why does Connecticut keep having budget shortfalls?
Revenue growth has been falling since 1989 and bottomed out in 2017.* Prior to 1989, average revenue growth was over 10 percent per year.** A 10 percent gain in general fund revenue today represents 2 billion dollars, an amount which would cover recent annual shortages.
Source: *DRS Annual Reports- Connecticut Department of Revenue Services website ** Volatile Income Tax Revenue Stumps States, Elaine S. Povich, Stateline, Pew Charitable Trusts.
Is government spending excessive?
State and local spending is rated as 46th out of 50 states in relation to the state’s total income (Gross State Product) and has been lean for decades according to a Connecticut Voices for Children Study.
Source: Report: Connecticut has greater capacity to support public investments in children, Wade Gibson, J.D., Fiscal Policy Center, Connecticut Voices for Children, February 2014
What about those claims of millionaires leaving the state?
Millionaires have increased by over 3,000 since 2004 and that number also includes multi-millonaires as shown by Connecticut DRS annual income reports. This is part of a national trend in which millionaires are increasing at more than five times the rate of the population growth.
Source: Edward N. Wolf, in Economy is creating millionaires at an astonishing pace. But what’s it doing for everyone else?, Christopher Ingraham, Washington Post, 12/8/17.
Where is all the new wealth coming from?
In Connecticut, much is derived from the lucrative business model used by CEO’s, hedge and private equity fund managers to “extract value” from businesses they control. The model involves borrowing money, paying themselves hefty fees, outsourcing jobs, cutting research and development, laying off workers and buying back stock to raise the value of stock options. Once maximum value has been extracted over the short term, companies are often lacking the financial and human resources for sustainable growth.
Source: Runaway Inequality, An Activist’s Guide to Economic Justice, Les Leopold, 2015.
Why isn’t all this new wealth helping the state’s economy?
• That is because “jobs don’t come from rich people,” they come from broad based incomes being spent, and those incomes have been eroded for over a generation. Much of the wealth acquired by hedge fund managers and wealthy investors is saved or invested. There is little broad based distribution of profits and therefore little spending in the real economy.
William Buhler, of Cromwell, worked at the Connecticut Juvenile Training School as a school psychologist and is co-chair of legislative action for SEIU/CSEA.