Why toll money won’t fix anything

Gov. Ned Lamont is being dishonest, although he may not realize it. Tolls won’t fund our transportation needs. The condition of Connecticut finances is so dire that it is inevitable that toll receipts will be diverted from transportation to cover ever-increasing state budget deficits.

Toll revenues will merely replace current transportation funding, yielding no net increase in funding for roads and rails. In reality, tolls are just another funding source.

How do we know this? Because that’s exactly what Lamont is doing now. His Democratic predecessor, Dannel Malloy, dedicated car sales tax revenue to the Special Transportation Fund. Lamont’s February budget proposed to divert $1.2 billion of those taxes from the STF in order to close the enormous deficit in the general fund budget. This proposal met withering criticism.

Lamont was chastened. So, in the budget just passed by the General Assembly, he diverted only two years’ worth, and then promised – promised – to dedicate Malloy’s original amounts to the STF in the next three years.

There’s a difference between the next two years and the following three years. The Connecticut Constitution requires the budget for the next two years balance. Beyond that, Lamont can say anything he wants. However, the reality is that, if he needs the car sales tax revenue in this budget, he will need it in the next budget. Indeed, by his own administration’s projection, there’s about a $2 billion deficit in the three “out years” from 2022 to 2024.

The same logic applies beyond the out years. If he will need the car sales tax revenue to close the general fund deficit in the three out years, he (or his successor) will need car sales tax revenue thereafter for the same purpose. So, toll revenue will just replace diverted car sales taxes, achieving no increase in overall transportation funding.

Moreover, the general fund budget for the next two years is built on crumbling foundations. First, just this week, Lamont admitted his budget includes $180 million more revenue than projected in the nonpartisan consensus revenue forecast.

Second, it relies on $450 million in concessions from state labor unions that have yet to be identified, much less approved by union bosses or the rank and file. Even if approved, unionized labor doesn’t give something for nothing, so, there will be increases of some kind in future labor expenses — you can count on it. How is Lamont going to pay for the future increases, if he can’t meet budget this year without concessions? Answer: tolls.

Third, the budget relies upon about $1.5 billion from an extension of Connecticut’s highest-in-the-nation hospital tax, which Malloy committed to reduce by two-thirds in the upcoming two-year budget and thereafter. The hospitals sued Malloy before he committed to the reduction. Lamont claims to have settled the suit, but he hasn’t released the terms.

The hospital suit may be the least of Lamont’s worries. The federal government is unlikely to allow Connecticut to continue a complicated scheme under which it uses the tax to generate federal Medicaid funds to close the budget gap, not to fund health care. Inevitably, this increases the cost of health care, something contrary to federal policy by anyone’s interpretation.

How is Lamont (or his successor) going to raise that kind of revenue in the out years and beyond, if the federal government disapproves the hospital tax, in whole or in part? Answer: tolls.

Fourth, in his two-year budget, Lamont has reduced by about $200 million the state’s contributions to the State Employees Retirement fund (SERS), but the required contributions in the out years are scheduled to return to those amounts and increase thereafter. How is Lamont going to pay the increased contribution in the out years and beyond, if he can’t pay it now? Answer: tolls.

Fifth, with Republicans completely opposed to tolls, Lamont is forced to try to attract votes from skeptical members of his own party by offering a modest middle-class tax cut as political cover. The proposition is ludicrous. How’s he going to pay for the proposed tax cut? Answer: who knows; tolls, if passed, won’t produce revenue for five years. Any legislator who goes for that “deal” is a fool.

Moreover, what citizen would accept a deal in which Lamont gives with one hand (tax cut) and takes with the other (tolls)?

It is obvious that Lamont is desperate for toll revenue to keep the state afloat. He should ask himself why deficits recur every year and why they get progressively worse. Until the real source of the problem is addressed, the funding for everything will be squeezed. Until we reduce what are euphemistically called “fixed costs,” namely overgenerous retired state employee benefits, the state budget will never balance.

Red Jahncke (Twitter: @RedJahncke) is president of The Townsend Group Intl. LLC, a Connecticut business consulting firm.

 

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