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October 12, 2015 Rule of Law

Policymakers ignore constitutional spending cap

John Horak

The biggest Connecticut business news event of 2015 is likely to be General Electric's decision about its future in Connecticut.  As one would expect, GE is thoroughly investigating the business climate in the several states it is considering for its headquarters, to the point (reported in the Sept. 11 Wall Street Journal) of examining how the members of each state's federal Congressional delegation voted on national issues important to GE. 

Let's hope that GE's research team does not look too closely at the way our state-level lawmakers voted when they adopted the recent Connecticut budget that triggered GE's disquietude about staying here. If they do, GE's departure will be a forgone conclusion. 

Here is why:  In the 2015 legislative session Connecticut's “budget cap” stood between the legislative majority and its desire to increase spending.  To get around this obstacle, a bare majority (52 percent in the House and 51 percent in the Senate) voted to modify the definition of the term “general-budget expenditures” as it appears in the cap (which sets the upper limit on spending) to exclude payments to the state's underfunded pension plans from the cap's limits.

The majority did this despite the fact that in 1993 then Attorney General Richard Blumenthal issued a formal opinion concluding that this could not be done with less than a 60 percent vote in both the House and Senate. 

How could this happen? What does it mean?  Let's take a quick look at the cap before addressing these questions.

The cap was put in place in 1991, and it has always befuddled legislators because it was written into law in two places: It was drafted into the statutes in 1991 (by the normal simple majority vote required for statutes), and into the state constitution in 1992 (which required the approval of the voters in a referendum).  While the two versions both use the term “general-budget expenditures,” they are not fully synchronized as the following demonstrates.

First, the constitutional cap is unusual in that it delegates back to the legislature (without the need for another voter referendum) the responsibility to draft the definitions of terms used in the constitutional text — including “general-budget expenditures” — but with the proviso that “[t]he enactment or amendment of such definitions shall require the vote of three-fifths (60 percent) of the members of each house of the General Assembly.” The legislature has yet to fulfill its responsibility to define these constitutional terms, 24 years later.  

Second, the statutory version of the cap raises unusual issues because while statutes can ordinarily be enacted or amended by the vote of a simple majority (which is what it just did with the term general-budget expenditures), the constitutional cap's 60 percent voting requirement for amendments of these terms is a large legal elephant that suggests otherwise.

This conundrum was presented to Attorney General Blumenthal in 1993, and he gave the elephant its due and concluded that the legislature could not amend the statutory terms with less than a 60 percent vote, because to conclude otherwise would render the constitutional cap meaningless.  

So, let's circle back to the two questions raised above:  How could the legislature amend the statute with a majority vote? What does their doing so mean for Connecticut?

The simple answer to the “how” question is that they cheated. The more complex answer, I suspect, is that the majority “took the position” (a legal term lawyers use when a client does something not clearly right but to which a defense is available if found out) that Blumenthal was wrong in 1993. There is a slim basis for this position in that attorney general opinions are considered influential but not binding legal authority — which means that the courts could disagree with his 1993 conclusion if the lawfulness of the budget were ever to be challenged in a lawsuit.    

What does this mean? The simple answer is that the legislature has disregarded the will of the people who voted to approve the constitutional cap. 

The more complex answer is that it will give any company doing business here (think GE) reason to wonder if the state legislature abides by the rule of law when it comes to managing state finances.

Moreover, while it is relatively easy to pull the wool over the eyes of voters, the same is not true for the bond market or rating agencies, which may not appreciate the shell game being played with our massive unfunded pension liabilities. The 2015 legislation in question reclassified liabilities to the pension plan as “indebtedness” (which the constitution excludes from the cap) seemingly without regard for other consequences — such as whether doing so caused the state to exceed its debt-limit statute.

Article 11 of the Connecticut constitution requires members of the legislature to take an oath swearing they “will support the constitution of the state of Connecticut … and faithfully discharge, according to law, the duties of their office.”  Perhaps I missed something when researching this issue and what the legislators just did is consistent with their pledge to support the constitution and act lawfully. As to that possibility I put them to their proof. 

John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. The views expressed are his own.

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