October 30, 2017

Budget negotiations lead to good, bad and questionable outcomes

Greg Bordonaro Editor

As the budget stalemate nears its end, now is a good time to reflect on the good, bad and questionable aspects of a $41.3 billion spending plan that has been stitched together on a largely bipartisan basis after months of acrimony and political grandstanding.

Is it perfect? Absolutely not, but there are some real long-term reforms that should benefit the state. However, Connecticut's fiscal crisis is far from over.

Rising long-term pension and retiree healthcare costs combined with a slow-growing economy will haunt the state for years to come, most likely leading to future deficits that will require even tougher budgeting decisions.

Details of the final spending plan negotiated by Republican and Democratic leaders in the House and Senate weren't fully fleshed out at press time Oct. 26, but here are some initial impressions.

The good

There are some true reforms in the compromise budget proposal including stronger caps on government spending and borrowing, something GOP lawmakers have backed for years.

Teachers are rightfully being asked to contribute more to their own pensions — 7 percent of their salaries instead of 6 percent — and there are revisions to prevailing wage and binding-arbitration laws that could help local governments save money.

The plan also requires the legislature to approve all state-employee contracts, a good step that should provide more taxpayer accountability.

Ultimately, however, Connecticut must go further in its attempts to rein in unsustainable public employee pension and benefit costs. The state-employee concessions package agreed to earlier this year, which will purportedly save taxpayers $1.6 billion over two years, but also give unions layoff exemptions and an extension of their current generous benefits contract until 2027, was a bad deal.

It will be interesting to see if that deal holds up for the long term.

Meantime, cuts to municipal aid and higher education were reduced from earlier proposed budgets and there are no increases to sales, corporate or income taxes.

That's significant considering the state has already been hit with two major tax hikes since 2011.

The bad and questionable

But while lawmakers claim to have balanced the budget on paper, only time will tell if that translates into reality.

In recent legislative sessions, Gov. Dannel P. Malloy and his fellow Democrats, who had full control of the House and Senate prior to this year, passed alleged balanced budgets that ended up bleeding red ink nearly as soon as they were signed into law.

Will it be different now that a bipartisan spending deal has been struck? We'll have to wait and see, but considering the budget was months late and lawmakers were negotiating key details in the dark of night and didn't have much time to digest the final deal before voting for it, it's safe to be skeptical.

Meantime, the city of Hartford will receive more money from the state, get help managing its debt and be subject to an oversight committee to cope with its fiscal crisis.

While that may help the city avert an imminent bankruptcy filing — Mayor Luke Bronin has warned the city will run out of money in November as it tries to tackle a $65 million deficit — the long-term impacts are unclear.

Hartford doesn't just need a bailout, it needs significant debt restructuring and changes to city employee contracts that will make for a sustainable fiscal future. We hope an oversight board allows for such reforms.

Finally, a key part of the conversation that has been missing from the contentious budget talks is how Connecticut will ramp-up economic growth. It's the private sector, after all, that will ultimately lead Connecticut to a more prosperous future.

Yes, lawmakers purposefully avoided tax hikes on businesses knowing that employer sentiment in the state is on unsteady ground. That was the responsible thing to do.

But Connecticut still lacks a long-term economic vision and growth plan as reflected in our continued slow recovery from a Great Recession that is now nearly a decade old.

At this point, it will be up to our next governor to articulate a more coherent blueprint for the future.

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