The Middletown Press (Middletown, CT)
“All right, Connecticut, we’ve got our mojo back!” says Lamont. But does it? See Dan Haar on
In the space of 15 hours Tuesday night and Wednesday, we heard two government CEOs declare blue skies and an end to the miserable way things were before.
President Donald Trump kicked off the carnival in the State of the Union address, claiming grass is green and children sing because he’s in charge. Among his many exaggerations, he said the 7 million jobs created in his first three years stand as an unprecedented work of magic, more than triple what anyone predicted.
Then on Wednesday, in our own economically, um, challenged state, Gov. Ned Lamont delivered his budget adjustments for the next fiscal year in a State of the State address that had us all wishing we had what he had for breakfast.
“All right, Connecticut, we’ve got our mojo back!”
Good for both for trying hard to make us feel good. Both have much to talk about. And both ignored a piece of reality, or in Trump’s case, lied about it.
We can dispatch with Trump’s overstatements quickly.
He’s massively overselling an economy that would catapult any decent human being to overwhelming reelection victory without extra hair gel.
Jobs? Yeah, 7 million is magic. That must mean Obama’s 8 million in his last three years were supermagic. Blue collar boom? The U.S. added just 46,000 factory jobs last year, worse than all but one Obama year.
Lamont’s picture is harder to read. Has Connecticut really turned the corner? When it comes to tax and fee revenues — the gas that keeps the engine running — some numbers say yes, some say no.
First, the small-ball news: Lamont wants the state to charge that annoying 2 percent, sometimes 3 percent service fee, every time we use a credit card for a government transaction such as renewing a car registration — in person or online. Yeah, towns do it for property taxes and colleges do it for tuition payments, but Connecticut is trying to be nicer than that.
The credit card fees will bring in about $4.5 million a year.
Lamont also wants to postpone the end of the 10 percent surcharge on the corporate earnings tax, for a savings of $22.5 million next year, about $50 million a year going forward. The state has levied the surcharge in all but three years since 2003, in amounts as high as 25 percent.
We need to curry favor with companies so they smile on us and stay. So the charge is not helpful. On the other hand, corporate taxes are not out of hand in Connecticut and the total isn’t large.
And, hey, we need the money. Lamont and Democrats in the General Assembly passed a budget last year that promised to find $50 million in fees in fiscal 2021 — a move that’s not happening because, in the words of Lamont budget czar Melissa McCaw, it “would be harmful at this time to the middle class.”
That led Senate GOP Leader Len Fasano, RNorth Haven, to quip, “It was a gimmick and he got caught.”
Sure it was a gimmick, but the deeper question is, why did Lamont need to go after small change at all if things are so good? The answer is that tax revenues are still falling short of the money the state government spends every year.
The good news, the bulwark behind Lamont’s ebullience, is that that gap — a “structural deficit” in budget-speak — is shrinking fast and will be gone by 2024. Maybe.
Consider: In the fall of 2017, barely more than two years ago, the forecast for fiscal 2022 was a deficit of $3.2 billion in the general fund. Today that projection stands at $757 million — and half of that predicted shortfall is because we’ve promised cities and towns an estimated $376 million in sales tax revenue, over and above the $3.3 billion the state already gives municipalities.
We’re such a nice state, right?
Another $184 million of the fiscal 2022 shortfall comes from a scheduled rise in the sales tax money from new cars that we said we’d put in the transportation fund. Recall, Lamont shortchanging that car sales tax transfer last year led to a collapse in his tolls plan, on trust issues.
In 2023, we run into some turbulence because it’s one of those years with 27 pay periods — woo hoo! — but by 2024, the structural gap is gone.
That means we’re in the clear even considering the payments we’ll need to make for pensions of state employees and teachers, and for payments on all those billions of dollars in debt, and for Medicaid.
In the clear forever? Just like states that actually work?
That depends on the nervous predictions for “estimates and finals,” which is jargon for the taxes on capital gains paid mostly by very rich people. Here are the totals forecast for that piece of revenue, starting this year: $2.46 billion, $2.53 billion, $2.66 billion, $2.75 billion, $2.85 billion.
Notice anything? Yeah, me too. It goes up every year with no blip. Can you say stock market decline? It has to happen sometime and when it does, Connecticut’s famous reliance on the income of rich people hits the shoals.
Add that to the fact that Connecticut’s economy still isn’t growing, and we have Republicans saying we’re not in happyland yet. As Themis Klarides, R-Derby, the House minority leader, put it after Lamont’s speech — we fix things in one place and mess them up someplace else.
Democrats counter that Connecticut’s $2.8 billion emergency reserve fund, projected for later this year, is enough to carry us through a downturn.
Republicans, who rightly take partial credit for creating that rainy day fund in the bipartisan budget deal of 2017, say the problem is still spending.
Lamont has plenty of spending headaches on his own side of the aisle, as Democrats push for free community college tuition and raises for nonprofit service providers while the governor tries to hold the line.
That’s such downer talk. For Wednesday, Opening Day of a new season, every lawmaker is batting 1.000, sitting at the top of the standings.
Lamont is the best governor ever, there will be growth in the spring and those estimates and finals are rolling in. Stay tuned.