We must not let state go back toward the era of fiscal crisis
Last month, about an hour after I was sworn in as Connecticut’s new comptroller, I sat behind Gov. Ned Lamont as he delivered his State of the State speech and declared, “The era of Connecticut’s permanent fiscal crisis is over.”
He’s right. For the first time in a long time, Connecticut is on solid fiscal ground. Our budget is running a surplus for the fourth consecutive year, our rainy day fund has reached historic levels and its legal limit at $3.3 billion. We have paid off more pension debt in the past two years than any time in history.
But just because Connecticut may be feeling “financially” healthier doesn’t mean it’s time to stop doing the things that made us better in the first place.
As my wife and I tell our young son when he’s sick, you still need to take all of the medicine the doctor gives you, even when you start to feel better.
Taking our medicine is what has gotten Connecticut to this point, and it’s what we must continue to do. However, the key policy piece that kickstarted this progress — the bond lock — faces expiration on June 30. Without action or renewal, we risk sending ourselves back toward the era of fiscal crisis.
For the sake of our children and this state we love, we cannot let that happen. That’s why I’m urging my former colleagues in the General Assembly to extend the bond lock for 10 more years when it expires on June 30.
Quick history lesson: the bipartisan budget that was the result of 2017’s legislative stalemate produced a budget that enacted a series of fiscal controls such as a spending cap (which limits general expenditures), a bond cap (which limits what we put on the state’s credit card) and most importantly a volatility cap (which sets a threshold for certain types of revenue to reduce reliance on one-time influxes).
The volatility cap, championed by my predecessor Comptroller Kevin Lembo and my former Finance Committee co-chair John Fonfara, had a simple goal: bring stability and predictability to our state budget. How? Given our proximity to Wall Street and the number of high-earning residents who work there but live here, Connecticut’s budget is heavily tied to performance of the market. When things were good, our budget was good. When things weren’t, our budget would crater.
By implementing a volatility cap, we took the revenue from volatile revenue sources in good times and automatically put it in the rainy day fund to guard against bad times, which would end the boom-orbust, roller-coaster budget cycles of the late 2000s and 2010s. Further, when the rainy day fund is full, we use the volatile revenue to pay off pension debt.
To ensure lawmakers couldn’t reverse these changes, we required a covenant in Connecticut bonds issued between May
15, 2018, and June 20, 2020, mandating the state comply with the caps put in place in 2017 — which then became the bond lock.
Disregarding the bond lock now would have disastrous and, frankly, unthinkably bad fiscal consequences for Connecticut, the first of which would be the self-destruction of our bond rating and ability to borrow. The fiscal turnaround we’ve experienced because of the bond lock is real, but so is the feeling from both parties that these guardrails are too restrictive.
Some have well-intentioned uses for the locked funds beyond solidifying our finances, but this temptation will only grow with time. That is why we must resist temptation and why extending the bond lock for 10 more years will ensure our continued fiscal turnaround. It will also help propel our state into the decade of economic growth we so desperately need after years of stagnation.
Connecticut, we need to keep taking our medicine even if the signs point to us no longer being sick. What we are doing is working and now, more than ever, we need to stay the course.