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October 17, 2018

Panel leaders want new life for their plan to fix CT's finances

PHOTO | Steve Laschever Former CEOs Bob Patricelli (right) and Jim Smith co-chaired the Commission on Fiscal Stability and Economic Growth.

After challenging legislators — in an election year — to cut taxes, slash spending, establish tolls, raise the minimum wage and change labor laws, Robert Patricelli and Jim Smith watched legislators politely pass on these ideas without voting last spring.

But since then, the leaders of the former Commission on Fiscal Stability and Economic Competitiveness have criss-crossed the state, speaking with dozens of civic groups and candidates.

The hope, they told the CT Mirror during an interview Monday, is to improve chances for the only holistic strategy offered so far to revitalize Connecticut’s finances and its economy.

That’s a far cry from eight months ago, when these two prominent business leaders boldly predicted legislators would not shelve their plan without a vote, as they had so many studies beforehand.

“As we go, we are continually learning too,” said Smith, the chairman and former chief executive officer of Webster Bank.

“Perhaps this is working out for the best,” said Patricelli, a health care entrepreneur. In hindsight, he added, the lack of legislative action this year should have been “entirely predictable. Realistically the best it probably would have been was only partial” acceptance of the plan.

The 14-member panel, which was disbanded after it released its report, was created through a bipartisan legislative compromise. It immediately faced a daunting task:

Chart a path forward, in just two months, for a debt-ridden state financial system and the economy it was bogging down — and make it acceptable to both parties in a narrowly divided General Assembly.

The commission added to its own challenges by insisting that lawmakers refrain from making major changes to the blueprint. Tweaks were fine, but essentially the plan should be taken largely as a whole, commission members said.

And Patricelli and Smith frequently acknowledged the plan contained plenty for people to hate.

To begin with, it was centered on a major redistribution of state taxes — primarily reducing income tax rates across the board while boosting the sales and business levies. But because the wealthy pay the majority of state income taxes, they would benefit disproportionately from this rate reduction. The plan also would eliminate the estate tax, which is levied only on estates worth more than $2 million.

To help balance the books, the plan recommended a $1 billion cut to the state’s annual operating budget — 5 percent of the General Fund. And while commission members said the savings could be achieved through privatization of social services and other efficiencies, Democratic legislators — already wary of a big tax break for the rich — said last spring that the spending cuts would fall heaviest on social services, education, and municipal aid.

Some Democrats and labor groups also charged thatthe panel was dominated by pro-business interests.

Republican lawmakers weren’t thrilled either. An income tax cut was great, but higher sales and business taxes to help pay for it was a problem, they said.

The GOP also balked at the panel’s recommendations to fund a major transportation overhaul with electronic tolling on state highways, and to raise the minimum wage from $10.10 to $15 per hour by 2022.

So what’s changed?

For one thing, Smith said, legislators have had time to get over the sticker shock.

With $80 billion in unfunded long-term obligations — an estimate that’s closer to $100 billion using more conservative projections for state pension fund investments — Connecticut couldn’t expect a path forward that didn’t involve fiscal pain, Smith said. “It’s all about the education phase right now,” he added. “I think we are gaining traction. What we are actually hearing is overall support.”

Patricelli said during a recent speaking engagement before a civic group in Greenwich, he was surprised to find that community’s four state representatives and senators — and their challengers in the November elections — all in attendance.

“They are very well aware that these problems aren’t going away,” Patricelli said, adding that in the eight months since the commission’s report came out, public awareness of the state’s long-term fiscal problems has grown considerably. “People have been soaking this in and they want to see something done,” he added. “I’m quite optimistic. We’ve seen a lot of positive support. There is interest out there.”

And that interest isn’t limited to legislative candidates.

Gov. Dannel P. Malloy is not seeking re-election, and Patricelli and Smith said their plan’s best chance of moving forward is to be championed by a new governor — who is four years away from the next election.

“We need people who are going to be there a while to take this up,” Patricelli said.

The gubernatorial contenders — Democrat Ned Lamont, Republican Bob Stefanowski, and independent Oz Griebel all have cited the commission’s work, either at various debates or in other statements.

Like the 2018 General Assembly, the gubernatorial field has given the commission’s report mixed reviews.

Stefanowski “has met with Bob Patricelli and Jim Smith to discuss the report,” the campaign wrote in a statement. “While he agrees with a number of their recommendations, such as reducing unnecessary spending, cutting income taxes and eliminating the estate tax, he does not think we should enact others, like raising the sales tax and putting up tolls.”

Lamont campaign manager Marc Bradley wrote in a statement that the Democratic nominee supports a $15 per hour minimum wage, as well as the commission’s recommendation to develop a new urban university in Connecticut focused on science, engineering and mathematics degrees.

But Lamont also shares some of the concerns that Democratic lawmakers voiced last spring.

“Ned knows that we won’t have robust and widely shared economic growth in Connecticut without fiscal stability,” Bradley wrote. “He would have liked to have seen a broader range of voices represented on the commission, and believes that its full set of recommendations would shift too much of the burden of resolving the fiscal crisis onto the backs of Connecticut’s middle class.”

Griebel, like the commission, would repeal the estate tax and eliminate the small, business entity tax. He also favors a major transportation rebuild, has proposed a pilot electronic tolling program, and has said there are few other realistic options to fund an overhaul of highways, bridges and rail lines.

But Griebel balked at the business payroll tax the panel recommended.

“I have great respect for Bob Patricelli, Jim Smith and everyone who worked on that commission,” Griebel said, adding that the panel’s recommendations stalled because Malloy lacked the clout in his final year to force some type of legislative action. “Without gubernatorial leadership being in the mix, being involved, being a champion, … no matter how well respected they are, it doesn’t work.”

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