A Decade of Profligacy, With No End in Sight

February 11, 2010

When the Great Recession hit Connecticut in early 2008, veteran budget-watchers found some reason for hope. However brutal and unwelcome the economic implosion, they thought, wouldn’t it force the state’s politicians to finally confront their addiction to Big Government?

Two years later, it’s clear that any expectation that Hartford would take a u-turn toward frugality was misplaced.

Legislators and lame-duck Governor M. Jodi Rell continue to dodge fiscal reality with a creative series of maneuvers. Borrowing, “securitization,” micro-cuts, blowing the budget reserve, rosy economic-growth projections, grabbing federal “stimulus” cash, a bogus “concession” deal with state employees -- no trick is too ridiculous to employ.

The immediate crisis is a $515 million gap for the current fiscal year, which ends June 30. (Deficits are also predicted for the next several years.) But seen from a broader perspective, Connecticut’s budget problems are threefold. First, politicians can’t stop spending. Second, Hartford powers the state’s main revenue-generator with a volatile fuel. Third, the private sector is increasingly unable to support the greed of the government class.

In the Aughties, Connecticut remained a low-crime state with a poverty rate well beneath the national average. The populace was healthy -- obesity is less common in the Nutmeg State than just about anywhere in the U.S., and according to the American Human Development Project, life expectancy at birth is higher in only Hawaii and Minnesota. Population growth in the decade was negligible -- a few percentage points at most. (The U.S.-born share of the citizenry dropped.)

But none of these factors produced a smaller state government. Adjusted for inflation, between 2000 and 2009, Connecticut’s expenditures rose a staggering 17.5 percent.

Connecticut started the new century with a governor who had won election in 1994 promising to repeal the state’s newly enacted income tax. Not only did John Rowland abandon his pledge, in 2003, he increased the income tax’s rate. Nearly 20 years after its enactment, the levy is now the primary funding mechanism for state government.

Contrary to the idiotic claims of Connecticut’s army of left-wing agitators, the state’s income tax is hardly “regressive.” The most recent data released by the Department of Revenue Services is for 2007. That year, over 1.7 million 1040, 1040EZ and 1040NR/PY forms were submitted. High incomes supplied a hefty share of revenue: Those earning over $500,000 contributed 42.6 percent of the total tax take. The portion paid by filers earning $30,000 didn’t rise to the level of a whole number: 0.6 percent.

The state’s treasury is disturbingly dependent on wealthy folks, most of whom live in southwestern Connecticut, to fill its coffers. So it suffers when they -- and those they employ -- suffer. The recession, a stock market swoon, and a vicious sacking of greater New York City’s financial-services industry have savaged the income tax’s ability to pay the bulk of the state’s bills. Between the 2008 and 2009 fiscal years, revenue raised by the levy plunged 15 percent. The new calendar year is offering little solace. In January 2010, income-tax revenue ran 15.3 percent below January 2009.

The sales tax, once the lead revenue source, covers just 17.1 percent of all state expenditures. A consumption tax supplies a predictable, reliable flow of funds, in sharp contrast to the boom-and-bust budgeting associated with an income tax. But few in Connecticut government care. Last year, lawmakers made the state more reliant on the unstable income tax, by adopting a higher tax rate for the most affluent.

The “millionaire’s tax” was long sought by the most powerful lobbying force in Connecticut: unionized public employees. Between 2000 and 2008 (good stats aren’t yet available for 2009) private-sector jobs in Connecticut increased by 0.3 percent. No such sluggishness for the state’s staffers -- in the same period, their ranks grew by 6.6 percent. (Local-government positions ballooned by 12.5 percent.)

The “givebacks” negotiated last year by the governor’s budget brain trust and state-employee unions were puny. The legislature’s Office of Fiscal Analysis reports that for the 2010 and 2011 fiscal years, the “savings” secured by the deal amount to 1.7 percent of expenditures. And due to Rell’s cowardly no-layoff compromise, Connecticut’s incoming governor won’t be able to cut personnel until the summer of 2011. Pathetic.

Based on the fiscal-policy decisionmaking of the last decade, the budget shenanigans of the present economic plunge come as no surprise. Pols, Democratic and Republican alike, will do anything to avoid cutting the cost and intrusiveness of Connecticut government.

The 2010 election is less than nine months away. It can’t come quick enough.

D. Dowd Muska is a writer, commentator and lecturer. His website is www.dowdmuska.com.

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