🔒State must adapt to new fiscal reality

It's decision time in Connecticut. The greatest decisions surrounding government policy often come down to whether government has a spending problem or a revenue problem.

In Connecticut, the answer appears to be both.

Spending needs to be reduced and because the program requirements of the state's population have dramatically shifted, tax reform — not necessarily higher taxes — needs serious consideration.

According to a report produced last month by the Connecticut Economic Resource Center Inc. (CERC), the aging Baby Boomer generation is putting a greater strain on government spending, particularly as it relates to health care. At the same time, the responsibility to pay for these programs is falling on a much smaller population group, born in the post-Baby Boom years.

As Gov. Dannel Malloy explained at the start of this year's legislative session, our state government is spending more than it is taking in. This is an unsustainable model that must be corrected regardless of the politics of the matter. Using basic math, it is clear the numbers do not add up, the budget does not balance and will not until we prioritize spending.

Connecticut has a complicated tax system that has proven difficult to change. In the 1980s an over-reliance on the sales tax proved itself to be inadequate during recessionary periods, which led to the eventual implementation of the income tax, which at the time was considered more stable.

In recent years, however, income tax revenues have also proven unstable because of their sensitivity to fluctuations in the stock market. Even our transportation fund is threatened by falling revenues as cars use less fuel.

Meanwhile, at the local level, an over-reliance on the property tax is making homeownership more difficult for many young families.

The tax problem is a major issue that may take years to sort out. Short of that, the obvious place to look when it comes to balancing the budget through common-sense policy is on the spending side. There are plenty of places to look, and due in part to Connecticut's current budget crisis, lawmakers are being forced to consider options they have ignored in the past.

Returning to Baby Boomers and health care, Connecticut government leaders should be encouraged to continue support for policies that allow senior citizens to stay in their homes and out of institutional settings for as long as possible.

This concept is often called “aging in place” and a recent study, also conducted by CERC for the Connecticut Institute on the 21st Century, says this policy alone can save the state more than $650 million over the next 20 years.

Healthcare policies centered on prevention can also save taxpayers money. There is early evidence that a prevention program instituted in 2011 for state employees is already paying off with a reduction in emergency room costs.

There is a tendency in government budgeting to avoid making these types of changes because they are considered incremental and fail to solve immediate deficits, but we have to change that mindset, because we simply have no choice.

Connecticut will dig itself out of the current fiscal crisis only when government leaders decide to adjust spending downward based on actual revenue. Our state will only return to a sustainable fiscal model when incremental changes — taken together — substantially reduce the cost of government.

Scott Bates is the executive director of the Connecticut Institute for 21st Century, a non-partisan, data-driven organization advancing public-policy solutions.

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