Battle lines are being drawn at the state Capitol over the budget. All signs point to an epic debate over fiscal policy. It may be worse than the 2003 budget year — when thousands of state employees were laid off — and may even approach the intensity of 1991 when Gov. Lowell Weicker successfully won approval of a state income tax.
Last month, Gov. M. Jodi Rell estimated the budget deficit has reached more than $300 million, and all signs point to more red ink in the immediate future. Comptroller Nancy Wyman upped that figure, declaring an $800 million budget “imbalance.”
Chronic over-spending and the decision by the governor and the legislature to forgo budget adjustments during the last regular legislative session combined with the current crisis on Wall Street are all contributing to the state’s expanding crisis.
It is still early, but a quick review of trends over the last 20 years shows that once the budget begins tumbling into a deficit or building a surplus, there’s a cascading effect. In other words, it is very likely Rell’s current $300 million deficit projection could double by the time the legislature comes back into session in January — and it will likely grow more by the end of the session in June. We can get to a billion dollars very quickly.
We should take little comfort in Connecticut’s $1.4 billion Rainy Day Fund, because using it up to balance the current fiscal year does nothing — by itself — to erase the growing structural hole. It is no more than a temporary fix.
Partisan Posturing
A full three months before the real budget battle begins, the governor and legislative leaders are staking out their partisan positions. Governor Rell, a reborn fiscal conservative, says she will not stand for any new taxes. Chris Donovan, the incoming speaker of the House of Representatives, is warning against panic.
Despite the early rhetoric, with a problem of this magnitude on the table, it is likely both sides will have to compromise to avoid a stalemate. It is very likely the governor — at some point — will have to settle for tax increases, and it is equally true Democrats will have to settle for spending restraint where they would rather see budget growth. So the posturing we see now is little more than a negotiating strategy from both sides.
There should be no surprises when the balanced budget solution comes out somewhere in the middle.
The unprecedented decision to adjourn the 2008 legislative session without taking action to keep the two-year budget in balance has the governor and Democrats right where they wanted to be.
Higher Taxes
By the time they get around to addressing the problem, the election will be behind them and they will have one full year to fix it all before the 2010 election. If you didn’t get it when it happened, now you understand the partisan interest both sides had in avoiding any painful decisions in advance of the current campaign.
The political losers in the deal were legislative Republicans, who tried to get the governor and majority Democrats to consider a series of conservative approaches before the budget began spilling into the red. Now their ideas may be adopted, but coming after the election it does them no good in terms of winning seats in the House and Senate.
But back to you and me. The trends do not favor self-correction for the Connecticut budget. As the economy falters, government spending on essential services often increases. Despite talk to the contrary now, tax increases appear inevitable.
Dean Pagani is a former gubernatorial advisor. He is V.P. of Public Affairs for Cashman and Katz Integrated Communications in Glastonbury.
