An election year does not provide a license to ignore budget problems
In the spring of 2010, a General Assembly in firm control of the Democrats, confronting a lame-duck Republican governor, M. Jodi Rell, who had no fight left in her, conspired to ignore gaping projected deficit projections and avoid any tax increases, cuts to municipal aid or reductions in social services.
As an editorial we published that May observed, this dereliction of duty “assures that the next poor sap in the governor’s chair has to demand the legislature raises taxes, cuts municipal aid and harms social services.”
As Connecticut finds itself in another state election year — every House and Senate seat will be contested as will the governor’s job — it should recall the lessons that should have been learned from that 2010 debacle.
Gov. Dannel P. Malloy remembers. He was that “next poor sap” who inherited the fiscal mess Rell and the legislature left him. Though the fiscal situation improved some during Malloy’s time in office — there have been moves that narrowed the pension funding gap, labor concessions that flattened the spending curve, and a debt paid — he did not come close to fixing it.
It is important to recall how bad it was in 2010.
Unwilling to demand any sacrifices, the legislature emptied out the state’s Rainy Day Fund of nearly $1.4 billion and borrowed another $1 billion to pay for on-going expenses. Rell washed her hands of the ugly mess that, along with other politically convenient but reckless decisions, left Malloy facing a $3.4 billion deficit when he arrived in office following his November 2010 election.
Last month, the state finally paid off those “economic recovery notes” — meaning the $1 billion borrowed seven years earlier to keep Connecticut running.
“Completing payment on the economic recovery notes closes a regrettable chapter in Connecticut’s financial history,” Malloy said at the time. “Surely, reasonable minds agree that we must avoid repeating this costly decision.”
While the situation is not as dire as the last time a governor was nearing the end of her term, the legislature is again confronting what to do about a deficit in an election year.
With less than five months left in the fiscal year, Connecticut confronts a $245 million deficit. And according to the Malloy administration, the second year of the two-year budget could face a $300 million shortfall without adjustments.
Malloy has proposed a series of tax increases, which would have the advantage of not only raising revenues to close the current budget gap but improve the fiscal picture long term, if only marginally. According to the Office of Fiscal Analysis, without adjustments, the incoming governor will confront built-in deficits of $2.2 billion and $2.9 billion in the two-year budget that she or he will have to begin preparing after the November election.
The downside of tax increases is that they would act as a brake on a state economy trying to gain some traction. Malloy has proposed eliminating the $200 property tax credit homeowners use to offset their state income tax bill, saving the state $50 million annually. The governor also proposes hiking the hotel, tobacco and real estate conveyance taxes.
Malloy would eliminate the sales tax exemption for nonprescription medicine, expand the bottle deposit requirement to wine, liquor, tea and sports drinks, and maintain the corporate surcharge tax at 8 percent. Now 10 percent, the legislature voted to eliminate the corporate tax.
A comprehensive examination of tax reform makes far more sense than this hodge-podge of small tax increases, but that is not likely to happen with a governor preparing to leave office. At least the governor is proposing a plan. If legislative leaders don’t like it, the public needs to hear alternatives.
What this legislature should not do is hand off the problem to the next governor and legislature by way of inaction, exhausting the Rainy Day Fund in the process and perhaps once again forcing election-year borrowing.
Unlike Rell, it appears Malloy won’t be rolled over in his last year. The legislature may ignore him and the problems, or it could pass a questionable budgetary “fix” with enough votes to survive a veto — as it did in passing the current, flawed budget.
But don’t expect a repeat of 2010 when Rell and the two Democratic leaders of the House and Senate declared — in defiance of the facts — that they had “address(ed) Connecticut’s unprecedented challenges.”
The editorial board is composed of the publisher and four journalists of varied editing and reporting backgrounds. The board's discussions and information gained from its meetings with political, civic, and business leaders drive the institutional voice of The Day, as expressed in its editorials. The editorial department operates separately from the newsroom.