by | Sep 28, 2022 11:38 am
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Wednesday’s Chamber of Commerce-hosted candidate forum.
New Haven and Hamden Democratic state lawmakers threw their support behind fiscal “discipline” and recession preparedness when faced with a question that will likely dominate this year’s legislative session.
That is: What to do with Connecticut’s record budget surpluses?
Greater New Haven Chamber of Commerce President Garrett Sheehan asked that question directly to lawmakers Wednesday morning during a New Haven and Hamden state legislative candidate forum hosted online via Zoom.
The surplus-focused question comes as top elected Democrats like Gov. Ned Lamont celebrate the state’s record levels of available cash and stress the need to prioritize fully funding state pension payments and preparing for a likely recession. Republican hopefuls like gubernatorial challenger Bob Stefanowski, meanwhile, have increasingly focused their campaigns for office on promises to significantly deplete those surplus funds to send money back into the pockets of Connecticut residents in the form of tax cuts at a time of record high inflation.
Click here to read a recent article by CT Mirror budget reporter Keith Phaneuf about that fiscal-political debate, and about how Connecticut now has more than $3 billion in budget reserves and has spent nearly $6 billion in surplus on bringing down the state’s pension debt.
Thus Sheehan’s question to state lawmakers on Wednesday: “As we head into the budget planning year” this legislative session, he asked, “what is your anticipation of the budget? Do you expect to see a deficit or surplus?” And how exactly should the state spend this surfeit of dollars now amassed thanks to federal aid and a maxed out rainy day fund?
Over the course of Wednesday’s forum, the participating Democratic candidates consistently sided with Lamont in emphasizing the need to pay down pension debts and make sure the state has enough cash available if hit with an economic downturn. Those same lawmakers also stressed the need to find a way to increase investments in everything from affordable housing to workforce development to public transportation to municipal aid.
Traditionally in Connecticut, Republicans portrayed themselves as more fiscally conservative than Democrats. This campaign has scrambled those definitions, at least on the issue of how much government should guard against deficits, as Wednesday’s forum exemplified.
However, only two Republicans attended the Chamber forum out of eight participants, so mostly it was the Democratic dynamic on display. One of those two, New Haven state representative candidate Eric Mastroianni, appeared only briefly because of apparent internet connectivity problems.
“I think we’re going to have a very robust conversation” in the legislative session to come about how these surplus dollars should be used, New Haven State Sen. Gary Winfield said. “Any monies that we have tat we can legitimately, thoughtfully use to pay down that pension [dent], we should do.” That said, he continued, lawmakers will also have to “think about those left behind” and how Connecticut can invest in critical social service needs without throwing off the state’s pension payment responsibilities.
New Haven State Sen. and President Pro Tem Martin Looney agreed. “We have a very substantial budget reserve fund” that has been built over several years and that is currently at 15 percent of the general fund. “That’s a great achievement,” he said. He praised the “fiscal discipline” that has brought about the state budget surplus — including the spending and borrowing caps imposed by a bipartisan 2017 budget accord.
“I had some pretty significant concerns about the volatility cap” when state lawmakers put in that mandatory saving-and-pension-payment rule back in 2017, Hamden State Rep. Josh Elliott said.
But, “in practice right now, I think it has done some really good things,” and has put Connecticut in a good place to weather a coming fiscal downtown.
“We know a recession will come,” Elliot said. Will it be next year? Five years from now? Ten years out? No one can tell.
But based on the Great Recession of 2008 and 2009, and in particular at “how quickly we burned through the marginal rainy day fund at the time, it happens very quickly. We are in a really good position for if and when that time comes.”
That said, Elliott continues, “we are also able to make some really historic investments in our population” thanks to the wealth of funds Connecticut has on hand right now, including federal infrastructure and pandemic-relief aid. That money needs to be put into affordable housing, public transportation, and workforce development.
As a small business owner himself, Elliot said, he is “having some of the hardest times that we’ve ever had in terms of hiring.” The state government needs to find a way to encourage and incentivize workers to fill empty jobs. And, he said, “the government needs to be asking those who are doing well to help out more.”
“We have a lot of unmet needs,” New Haven State Rep. Pat Dillon added. But, she said, “I personally oppose messing with the paying down of pensions.” She recalled looking just five or six years ago at the trajectory of the state’s pension debts and unfunded liabilities. It was pretty grim. The outlook now is much better thanks to former Gov. Malloy’s, current Gov. Lamont’s, and state lawmakers’ prioritization of fully funding pensions. “We have to keep that in place,” she said.
Kathy Hoyt, a Republican State Senate candidate who is challenging Hamden State Sen. Jorge Cabrera in November’s general election, threw her support during Wednesday’s forum behind prioritizing tax cuts, tax cuts, tax cuts.
“We have a giant pile of money that we’re sitting on,” she said, thanks in part to a significant increase in federal pandemic-era aid.
While she said she would not remove the spending cap for next year — “I don’t think that’s good,” the state should keep it in place to protect against a coming “rainy day” — Hoyt did say she thinks that some of the rainy day fund should be spent on making Connecticut more affordable.
That means, she said, cutting taxes. “We could reduce the income tax,” she said, extend the gas tax, and cut taxes on diesel. “The trickle down effect [of high taxes and inflation] is crippling,” she said.
Cabrera, like all of the Democrats on Wednesday’s panel, responded by celebrating just how strong of a position Connecticut’s budget is currently in.
“Our rainy day fund is maxed out,” he said. “We do have surpluses. Our budgets are balanced. We’re in a very strong position to weather an economic storm.” What lawmakers will have to figure out how to do next year is balance this budget surplus, pension-funding priorities, and recession preparedness with the need to keep investing in housing, education, and healthcare, he said.
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Big picture – Connecticut is still in the bottom 3 – 5 states for overall fiscal health (multiple sources), and we have ~ $90 BILLION in future obligations – way too much for a tiny state. Our politicians GROSSLY underfunded our pension obligations (for decades), then borrowed and, more importantly, ALREADY SPENT far more than our tax base could afford.
The ONLY WAY out of Connecticut's fiscal crisis is economic growth. We need LARGE employers back here. Hopefully, we can also create new industries if we become more competitive and better for business than other states (lower our cost of living, more affordable housing). We MUST do these things, or else we will not have enough wealthy taxpayers to pay future bills, and the tax base will again shrink.
FWIW – The bills will skyrocket in the next 10-20 years, especially as more public sector and union employees retire and require more benefits than today. Also, remember that many retirees will seek a less expensive state when they are on a fixed income, especially if we have a prolonged recession.
Politicians should NEVER be trusted with our fiscal future again. Even as late as 2016, many of them publically stated that "we do not have a fiscal crisis" or "we are a rich state we can keep raising taxes". Gov. Malloy learned the hard way – TWICE! As any economics professor will tell you, raising taxes will eventually be counter-productive if the value of those taxes is not felt by those paying them. There MUST be value.
CT Politicians' legacy (some are still in office) is a legacy of debt, anti-growth policy, and financing our children's futures to pay for current spending. Unbalanced power destroyed our state until they were LITERALLY FORCED to "stop the insanity" with a spending and volatility cap in 2017 that COULD HAVE been in place since 1991!
We can't allow that nonsense again; no matter who you support politically, we MUST ALWAYS spend within our means, no matter how painful it gets.
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