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    Wednesday, December 07, 2022

    State law has the last word on windfall

    Connecticut has a good problem that got even better last week: The surplus in the General Fund is now projected to be $445 million in the current fiscal year budget of $24.2 billion. If that holds up, it will need to be put to use.

    That kind of talk was never heard in the decades of put-it-off budgeting that produced record deficits and caused some major corporations to downsize in the state, lest they and their employees end up paying higher income and sales taxes. Connecticut’s fiscal reputation was in rags.

    The projected surplus and the even larger one that ended FY 2022 in June are the result of state officials sticking to the stern goals they set in place -- and luck. Officials are following the bipartisan strategy enacted in the General Assembly in 2017 that established a reserve fund and determined the steps to take if a windfall raised it above the minimum.

    Luck, in the form of bull markets that bestowed huge, taxable gains on investors and the win-some, lose-some economics of the pandemic and federal recovery funds, stoked the windfall that helped put the state in the enviable budget position it is in.

    Those markets and that kind of bipartisan cooperation are gone for now, though. Many see a disconnect between the cushiony surplus and the pain of consumers, already facing inflation and soon to be hit with soaring costs for health insurance, energy and items delivered by fossil-fuel burning vehicles and vessels. Connecticut taxpayers got a $660 million tax cut in the recent budget but Republicans running for office want to do more.

    In case no one was listening the first time they said it, in June, Republican legislative leaders last week requested a special session on more funding for energy assistance this winter. Democrats, who control the legislature, said the same thing to the Republicans as in June: No. One motive is the ignoble politics of having the upper hand, but another is that wait-and-see is a plausible stance.

    Gubernatorial candidate Bob Stefanowski, meanwhile, announced a $2 billion relief plan of one-time cuts to various fuel taxes and a property tax credit that might roughly double the current $300 credit, among other moves. He would find about $1.3 billion by taking it from the $3.3 billion in the reserve fund.

    Stefanowski’s plan would lower the fund to about 9 percent of annual operating costs, well below the 15 percent the state comptroller, lawmakers and then-Gov. Dan Malloy agreed on. On Wednesday, Comptroller Natalie Braswell moved $3.1 billion of the current surplus into the reserve fund. That raised the fund to a level under which the law requires a one-time, special payment of $2.8 billion on the debt that has dragged on the state’s economy, its unfunded pension liabilities.

    According to the Connecticut Mirror, the state has already made $5.8 billion in supplemental payments on the pension debt, which stood at $41 billion three years ago. A new accounting is due shortly after the election.

    Shouldering the pension obligations took the state too long, with consequences both for Connecticut residents today and for their children and even grandchildren. Today’s inflation is a burden, to be sure, but it is not institutionalized in state finances the way state employees’ and teachers retirement fund debt was and still is. The state Office of Policy and Management estimates the newest payment will save Connecticut taxpayers about $6 billion in the next 25 years.

    If the state had not already given taxpayers $660 million in relief in the current budget, postponing tax relief in favor of lowering long-term obligations would be a tougher call to make. As it is, paying down the debt is not only the right priority; it is the law.

    The Day editorial board meets regularly with political, business and community leaders and convenes weekly to formulate editorial viewpoints. It is composed of President and Publisher Tim Dwyer, Managing Editor Izaskun E. Larrañeta, staff writer Erica Moser and retired deputy managing editor Lisa McGinley. However, only the publisher and editorial page editor are responsible for developing the editorial opinions. The board operates independently from the Day newsroom.

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