It was fortuitous that on the same day Democrats crowned Gov. Dannel P. Malloy as their candidate to safeguard the state’s highest executive office this November, labor officials announced Connecticut’s unemployment rate ticked below 7 percent for the first time in five years.
With 2,200 jobs added in April, Connecticut’s slow-moving economic recovery is headed in the right direction, giving Malloy a much stronger case for re-election. It also gave Democrats even more reason to cheer and support the governor at their recent party convention in Hartford.
Meanwhile, at the Republican convention held at Mohegan Sun, GOP members endorsed businessman Tom Foley as their gubernatorial candidate, setting the stage for a rematch of the 2010 election, which saw Malloy win by a narrow 6,000 vote margin.
While Republicans still have to hold a primary, it seems likely Foley will be the party’s candidate, although Sen. Minority Leader John McKinney (R-Fairfield) and Danbury Mayor Mark Boughton still stand as formidable opponents.
For the business community, the economy and state finances will stand out as the two key issues that sway voter opinion. Both topics are inextricably linked, and while unemployment numbers are seemingly headed in a positive direction, the state’s fiscal position is weak.
State taxpayers face a $1.4 billion deficit in fiscal 2016, giving the next governor a tough task to battle on day one. Malloy has some experience in this arena; he faced a more than $3 billion budget deficit when he was elected to office in 2010. He responded with a mix of tax increases and budget cuts that seemed to close the funding gap. Then, in preparing his second, two-year budget a few years later he resorted to borrowing and other fiscal gimmicks that will leave the state with another big deficit after the upcoming election.
Malloy was thrown into a tough spot — one that he chose to be in — that had few good options, but it’s clear his policy choices didn’t solve the state’s short-term fiscal challenges. Now the question remains, what is his strategy to tackle next year’s deficit?
Malloy already has sworn off more tax increases, a smart move given the electorate’s aversion to further levy hikes. Any mention of tax increases would completely turn away business community support, but it also limits Malloy’s options. No doubt, he will be hoping for a more robust economic recovery in the months ahead to cushion state revenues.
Malloy and Foley (or any other Republican candidate) must be forthright about their plans to tackle the looming deficit. Speaking in broad strokes won’t be enough to assure businesses that there is a clear vision to shore up state finances, while still making Connecticut economically competitive. The state can’t afford further tax increases.
As we head into debate season over the next few months, there are some major questions each candidate will need to answer with some specificity. Will, for example, the next governor be willing to borrow more money to fund state operating expenses? It’s a nasty habit that recent governors, including Malloy, have sworn off as bad policy but resorted to out of desperation.
Meanwhile, according to the Connecticut Mirror, there are about $220 million in tax cuts that are scheduled to go into effect next year, including expiration of the 20 percent corporate tax surcharge. Does a “no tax increase” pledge include allowing scheduled tax cuts to move forward?
These are all important questions, especially to employers weighing where to invest capital. Let’s hope the candidates answer them with candor, rather than offering empty promises or non-descript talking points.
