My recently announced plan to eliminate Connecticut’s $302 million 2009 fiscal year budget shortfall does not require layoffs of state employees or drain the Rainy Day Fund, which should be used only as a very last resort.
Most importantly, it does not impose new burdens on our hard-pressed taxpayers and businesses coping with the fallout of a national economic downturn. Raising taxes is the worst thing we could do in a recession.
My plan does require Connecticut’s government to live within its means and reduce its spending, just as our families are doing.
Connecticut faces an economic situation unlike any we have ever seen. Despite this, Connecticut is positioned to weather the storm — if we make the right spending decisions.
Wall Street Fallout
These shortfalls are almost entirely due to the turmoil of the nation’s financial markets. Wall Street has not only affected the thousands of Connecticut residents who work in the financial services industry, it has destabilized the stock prices of some of our largest employers. Medium- and small-sized businesses have been affected as well.
Our citizens wonder if they will be able to hang on to their jobs. They have watched with anxiety as their savings, retirement, and college savings accounts, plus other investments, have dwindled — or even disappeared. They have watched neighbors lose their homes. They have seen their retirement plans put on hold.
Earlier this year, as the economic picture began to darken, I reined in state spending to keep last year’s state budget “in the black.” I ordered state agencies to cut gasoline use, cease all but the most essential spending, implement a hiring freeze and ban state-funded out-of-state travel.
More Belt Tightening
That belt-tightening helped us finish the 2008 budget year in July with a small surplus of $84 million. I proposed using that entire amount to help Connecticut families, senior citizens, human service providers and schools with their winter heating costs given the outrageous increases in energy prices. The legislature approved my plan.
Near the start of the 2009 fiscal year, the economic problems facing our country were about to explode. State revenues from all sources were steeply declining. Faced with implementing a budget already out of balance by $150 million, I ordered budget cuts to close the shortfall.
These rescissions were difficult but necessary. Wherever possible, I tried to ensure that agencies with the greatest public safety or human services roles saw the smallest cuts.
Some agencies – such as the Department of Correction — saw no cuts at all. Other major spending, such as aid to municipalities, cannot be cut.
In September, the U.S. economy suffered its worst decline since the 1929 Great Depression and state revenue projections spiraled downward. My budget office was now projecting a deeper deficit of $302 million — even after my earlier $150 million in cuts.
A second round of budget cuts totaling $34 million was ordered. On Oct. 21, I presented my Deficit Mitigation Plan to the General Assembly to erase the remaining $268 million shortfall.
I closed the shortfall by making more spending cuts, forcing a settlement with the federal government to bring in $157 million owed to Connecticut, canceling the start of new state programs and by proposing a tax amnesty program to retrieve delinquent dollars.
The difficult economic conditions will not end with this year’s deficit. Bigger challenges — and with them, bigger changes — are coming. However, I believe we will not only master these challenges but use the opportunities for change to streamline government and make it more responsive to taxpayers.
It is the perfect time to require government to live within its means.
By making the right budget decisions, I firmly believe that we will emerge a stronger state, better able to take advantage of economic opportunities and create better, more plentiful jobs in the years to come.
M. Jodi Rell has been serving as governor since July 2004.
