Election-year politics were on clear display during this year’s legislative session, which was filled with little drama, few significant policy issues, and political grandstanding by both parties.
Is the state better off today, than it was before 187 elected senators and representatives opened the session back in February?
For the business community the answer is largely no. Despite seeing no new tax increases or major regulatory burdens, the state’s fiscal position remains extraordinarily weak, giving businesses little confidence that Connecticut’s economic competitiveness will improve anytime soon.
In fact, it increases prospects of future tax increases, which are sure to play on the minds of decision makers contemplating where to invest capital.
A recent sharp drop in tax revenues has thrown the state’s finances off-kilter, again, virtually erasing a projected $505 million surplus this fiscal year, and shrinking next year’s projected surplus to $10.7 million. Even worse, Connecticut now faces a $1.4 billion deficit in fiscal 2016.
The fact the state remains mired in red ink is a failure among policymakers to realize, and act on, the reality that current spending levels are no longer sustainable. We’ve tried in the past to tax our way out of the fiscal abyss, only to find ourselves quickly back in the same black hole we came out of.
When Malloy and the Democrat-controlled legislature increased taxes by about $1.5 billion a few years ago to close a $3 billion-plus deficit, taxpayers were led to believe it would lead to fiscal stability.
Clearly, that is not the case. The state budget continues to be filled with one-time revenues and other fiscal gimmicks that simply serve as patchwork to wholly broken state finance system.
The new $19 billion budget recently adopted by the legislature, for example, relies on $75 million of miscellaneous tax revenues, which state tax collectors will attempt to pry from scofflaws.
Yes, Connecticut is relying on tax cheats to balance its budget.
To be fair, Malloy doesn’t get all the blame here. He inherited a fiscal mess left by his Republican predecessor.
Fixing the state’s poor financial position was going to take years, and the Democratic governor has taken some good steps to sure up long-term liabilities.
He’s also attempted to be a pro-business governor, adopting various incentives and tax breaks for companies that add jobs or invest in the state. Such policies are a nice touch, but won’t significantly move the employment dial.
A stable fiscal outlook combined with a fair tax and regulatory environment would benefit all employers, not just a select few.
Malloy has failed to meaningfully reduce spending at a time when state government needs to not only trim fat, but cut into the meat.
Yes, Connecticut has plenty of wealth, and we can continue to increase taxes on businesses and individuals to solve our short-term fiscal woes, but it will set up the state for long-term failure. It will further encourage businesses to invest outside Connecticut, leaving fewer job opportunities in the state and a further erosion of the middle-and-working class.
Bankrate recently ranked Connecticut 41st for retirement quality of life and a recent Gallup poll showed that almost half of Connecticut’s residents would move to another state if they had a chance. Negative sentiment — some of it deserved, some overblown — has been hanging around the state for far too long.
Unfortunately, lawmakers have given residents little reason to change their outlook.Â
