Deficits again looming
I t took a long time for Connecticut to dig out of the fiscal hole created by the Great Recession and exacerbated by decades of failing to adequately set aside funds for its pension obligations. But a corner had been turned and, showing some monetary discipline, a record $2.5 billion budget surplus — a rainy day fund — was accumulated.
The good news is that Connecticut will have that surplus to mitigate the fiscal damage it faces due to the pandemic. Revenues have plummeted across the board. Sales tax revenues have dropped because no one is out buying. Gasoline tax revenues have plunged because driving is down by half. And income tax revenues have dropped as unemployment spiked and investment income declined.
The bad news is the surplus won’t be nearly enough to cover the losses. Analysts foresee a $7 billion revenue decline over the next three years.
The state anticipates a $934 million deficit this fiscal year, a projected $2.3 billion gap in the budget that begins July 1, and another $2 billion in each of the next two fiscal years that follow. And the numbers may be optimistic.
Everything will have to be on the table to address this. Everything except once again pushing off pension obligations.
State workers must again be asked for a wage freeze. Yes, that’s been demanded of them repeatedly
There will be no easy means to that end. Anyone suggesting otherwise is self-delusional or lying.
over the past decade, but given how the private sector is being hammered we don’t see how state worker raises can be justified.
We don’t see layoffs as a good option. The state workforce has been thinned by past efforts to control spending. Services must be provided. And layoffs can be self-defeating by deepening the economic damage.
Like Gov. Ned Lamont, we have previously resisted calls for an income tax increase on highest earners because of its potential to drive those taxpayers elsewhere. Now it may be unavoidable. The rich are most insulated from the economic damage. And other states will be raising taxes too.
The gas tax will have to go up, the sharp drop in gasoline prices lessening that blow.
Municipal aid will suffer too, with regional approaches to trim costs demanded, not suggested.
And our elected leaders in Washington must fight for federal help.
Unlike the federal government, Connecticut must balance its budget. There will be no easy means to that end. Anyone suggesting otherwise is self-delusional or lying.