Less fiscal data won’t help curb spending

A new law hailed by Gov. Dannel P. Malloy as a “structural reform” to curb spending will mean providing the public with less information and could ease the pressure politicians feel to apply fiscal discipline.

In other words, it’s the wrong medicine for what ails the state.

The “reform” focuses on “current services” budget estimates. Every mid-November the independent Office of Fiscal Analysis and the administration’s Office of Policy and Management issue their Fiscal Accountability reports. Accountants examine current services provided by government. They estimate the cost to maintain them based on contractual and statutory obligations, along with inflationary adjustments. They also estimate the revenues taxes and fees will produce for state government.

They then produce the reports estimating whether projected revenues will cover the anticipated expenses. In recent years this exercise has projected large deficits, forcing the administration and legislature to find cuts and/or increased revenues (i.e. tax increases) to balance the budget.

Malloy contends the approach has a tendency “to increase spending on autopilot,” by assuming services will be maintained and the legislature has to figure out how to pay for them.

We agree with the logic. We have a problem with the solution.

Under the new law, OFA and OPM will only project the estimates for “fixed-cost drivers,” items that the state has a legal obligation to pay, such as pension contributions, debt service, entitlement programs, retiree health care plans, and federal mandates. These account for about 40 percent of the budget. The means of projecting expected revenues remains the same.

The goal, according to the Malloy administration, is to force the legislature to live within the state’s means. Under the new law, the reports will show the cost of the items the state must pay for and the revenue government has to work with. It would be up to the administration and lawmakers to prioritize what services Connecticut can afford.

In essence, the shift is intended to encourage zero-based budgeting.

Unfortunately, it does nothing to require this approach. Lawmakers can still ask for information from OFA as to what it will cost to maintain current services — even if the number does not show up in an official report — then set about budgeting and taxing accordingly.

What changes is that the administration will no longer have to suffer through those reports showing large deficit projections. Yet the deficit forecasts, like a blaring smoke alarm that can’t be ignored, have been the very thing driving Malloy and lawmakers to get serious about restoring some fiscal stability to the budget. In the fiscal year beginning July 1, state spending actually shrinks below current levels.

Cynics might suspect avoiding deficit projection headlines is Malloy’s real motivation. Yet, given the administration’s efforts to pressure lawmakers to cut spending and not raise taxes in the last session, we will give him the benefit of the doubt. The governor maintains the new law “is another step towards making the longterm reforms that we need to implement to be successful both now and down the road.”

To be charitable, let us call it a misstep, one the legislature should correct when it is next in session.

We propose providing the public more information, not less.

In plain language spell out the cost of continuing current services. Also highlight the expense of those fixed-cost drivers. Provide the revenue estimates, calculate if revenues are sufficient to cover the existing services (as is now the case), but also show how much revenue remains available after meeting fixed costs.

Then leave it to the public, the politicians and the process to work out spending priorities and tax policy.

If the legislature and the governor want to place genuine controls on spending they need to fix the constitutional spending cap. Malloy has set that as another priority. Voters adopted the 28th Amendment by a 4-to-1 margin in 1992. It sought to keep spending in check after the passage of the income tax.

Its intent is to limit increased spending to no more than the growth of personal income or inflation. While applying a weak brake on spending, governors and legislatures have come up with various methods to work around it.

The amendment states the General Assembly “shall by law define” the key standards of the cap, including how to measure the growth in personal income or inflation. The legislature has never done it. In November 2015, Attorney General George Jepsen opined that without the defining language the cap carries no legal authority.

A bipartisan commission, appointed by the legislature, is working to find language that can gain passage in the General Assembly and make the cap functional.

A spending cap with real teeth would do a much better job of providing fiscal discipline than an accounting change that does more to obfuscate the problem than fix it.