Issues for The Grumpy Taxpayer to contemplate
The terms General Assembly and “fiscal accountability” are mutually exclusive. I mean, whose profligacy brought us to where Connecticut is today? And who are we?
A dozen years after the exploding housing bubble, the Great Recession, and the banks that were too big to fail, we are left here holding the charred sticks of our financial industry’s Amazon rain forest.
In Stamford, UBS’s aircraft carriersized trading floor sunk, and with it the sixfigure jobs that kept afloat that city’s real estate market. The jobs that replaced them are much lowerpaid, like, say the Amazon “Fulfillment” Center in Middletown that pays $14 an hour.
And we’re due for another recession.
“The current economic expansion is the longest since the end of World War II,” Melissa McCaw, secretary of the state Office of Policy and Management, said a couple times the other day to a roomful of lawmakers. “But we have not fully recovered our job losses.”
The scene was a partisan political sandbox dressed up as a secondfloor meeting room in the Legislative Office Building.
McCaw and Neil Ayers, director of the nonpartisan Office of Fiscal Analysis, were there to provide a joint meeting of the legislative Finance and Appropriations committees with their fiscal accountability report: a deep, manygraphed look at the fiscal landscape two months before the start of the 12week budgetadjustment session.
Yep, this was the depths of Wonkville, on the cusp of a General Assembly election year that will have Connecticut Republicans fighting for their political lives, downballot from President Donald Trump.
Maybe the best news is the status of the Budget Reserve Fund, the state’s rainy day piggy bank, which contained a meager $213 million in 2017. It stands at $2.5 billion now and will likely top $3 billion by 2021. In a $21billion annual budget it’s more than a drop in the bucket when the economy tanks.
For those of you keeping score at home, the Senate Republicans’ notoll transportation initiative would take $1.5 billion from the reserve and pay down some of the eyepoppingly hefty unfunded pension liabilities. Savings on fringe benefits would be put into transit projects.
Lamont doesn’t like that idea, using everyone’s new favorite word — “risky” — to describe it.
In October, McCaw pointed out, Moody’s ranked Connecticut 18th out of 50 states in preparedness for a moderate recession, and 21st for a severe downturn.
The 40 or so lawmakers in the chamber were on their best behavior after getting back together for the first time in months in this socalled parttime legislature, where the average lawmaker makes about $34,000.
During the Q&A, Sen. Craig Miner, RLitchfield, skirted around the edges of the GOP toll proposal, asking McCaw generally about investing some of the reserves to pay down the $38 billion in unfunded liabilities in the retirement systems for public school teachers and state employees.
“It almost seems as though the return on investment, having the money sit there, is nowhere near to the cost of the General Fund were it to be put into the pension,” Miner said. “And maybe it’s the number that the governor takes odds with, as opposed to the transaction in general. Does the governor think that there’s any point at which there’s a benefit that might come, where it’s worth some risk?”
“The governor’s position is that he supports Moody’s recommendation of a reserve that suggests that we should be 14 or 15 percent,” McCaw said. “He has seen the data that clearly shows this is the longest economic expansion. Rating agencies have noted potential downturns, Moody’s has noted it, and he is not willing to put the state in a position where we are immediately going to have to resort to significant tax increases. He concerned about the impact on social service programs and wants to ensure that if and when a recession occurs that we have some time to react.”
In 2009, Connecticut saw a 3.7 percent decrease in income tax collections. The year after, tax collections increased by less than a percent, followed by a 5.2 percent increase in 2011. In 2018 and 2019, the growth was the highest since 2006.
One more issue for grumpy taxpayers to ponder. Of the $19.3 billion in General Fund spending, 28 percent is health and human services programming, including $3.3 billion in Medicaid related funding for lowincome and indigent. Nearly 22 percent is municipal aid and teachers’ retirement costs that towns and cities have successfully fought to keep funded at the state level. Nearly 32 percent of the budget is active and retired worker wages and benefits. About $2.2 billion is debt service.
And what about those freespending Democrats? Gov. Dan Malloy’s budgets averaged annual increases of about 2.6 percent during his eight years. Republican Gov. Jodi Rell averaged 4.2 percent a year. Her predecessor, Republican John Rowland averaged 4.7 percent.
It’s your tax money, so it’s advisable to pay better attention with how it’s spent.
In Stamford, UBS’s aircraft carriersized trading floor sunk, and with it the sixfigure jobs that kept afloat that city’s real estate market. The jobs that replaced them are much lowerpaid, like, say the Amazon “Fulfillment” Center in Middletown that pays $14 an hour.