Treat the state’s dire fiscal condition — or else

The state’s political budget-making process and traditional revenue and spending practices don’t have a prayer of solving the situation that threatens to weigh down Connecticut for another 15 years.

T he extremity of Connecticut’s fiscal condition is such that if it were a house, the new owner would gut it and rebuild from the inside out. If it were a chronic illness, like diabetes, there’d be no more buying time with diet and exercise. The patient would need full-scale treatment or risk losing a limb.

The state’s political budget-making process and traditional revenue and spending practices don’t have a prayer of solving the situation that threatens to weigh down Connecticut for another 15 years.

The people of Connecticut need to understand that budgetary options are limited now because of decades of virtually unfettered irresponsibility. The Connecticut Mirror and the Community Foundation of Eastern Connecticut convened a panel at Mitchell College this week to convey that we have allowed debt to become our legacy, and that the growing gap between rich and poor is eroding the common good. The bills are due.

As The Day has been reporting for several years, the major drag on the budget comes from underfunded obligations for public school teacher pensions, state employee retirement benefits and pensions, and bonded debt. Until 1971, the state put away no dollars to pay for pensions and benefits it had guaranteed. After that a little was saved, but nowhere near what actuaries told policymakers was needed. When the budget did include contributions to the plans, the legislature often raided the funds, rather than raise taxes.

As a consequence the state has had to budget ever-shrinking percentages for such line items as compensation to cities and towns for tax-exempt property, health insurance for low-income children and adults, tourism promotion — a moneymaker — and social services for the neediest.

Inequality is a problem now and a danger for the future. The income gap that has been expanding across the country is even more dramatic in Connecticut, where the top 1 percent of earners got 100 percent of the growth between 2009 and 2013, and the bottom 99 percent lost ground. One percenters outearned everyone else 42.6 to one. In the U.S. as a whole it was 25.3 to one.

We could be furious that past legislatures and governors treated retiree pension and health benefits obligations as a sort of pyramid scheme in which each generation’s benefits would be paid out of contemporary revenues. We could get even angrier over the lost interest that was never compounded on money not invested. It won’t help.

What could possibly help would be for elected officials to swear off the insanity of trying to balance a budget with out-of-date economic assumptions. The first step is to educate the public to the facts in hopes of a collective consciousness of the crisis. Step two is to skip the empty promises, such as eliminating the income tax, the backbone of what the state takes in. Step three is to build a rigorously realistic budget based on today’s obligations and opportunities. What the state cannot afford, it cannot afford.

On the revenue side, tolls will be necessary to assure out-of-state drivers help to pay for the roads they travel. Done right, tax reform can generate needed revenue, fairly, and with the least drag on the economy. Toward that end, The Day continues to recommend the Connecticut Commission on Fiscal Stability and Economic Growth as a starting point for overall reform of state finances. Begin with its mindset of sweeping change and tailor as needed for passage.

On the spending side, Connecticut’s nonprofit agencies represent a large piece of the budget. Although they took over former government functions such as caring for the mentally ill when two large state hospitals closed in the 1990s, their allocations are not “fixed costs” like pensions or Medicare. They are perched atop a Jello hill, waiting for the swipes with the big state budget spoon.

Their services cannot be zeroed out without chaos, but they can be examined for economies. Nonprofit managers on the panel say they lease out some of their space, collaborate to avoid duplication, measure whether well-intended programs do any good, and drop those that don’t. They say the state could get more for its money by recognizing that agencies know their communities’ needs best and can spend effectively and efficiently.

It’s bad, and everyone needs to know that. The old ways won’t fix it.