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February 10, 2014 Other Voices

Spending a surplus as a concept

Chris Healy
By Chris Healy

There is a reason governments are not run like businesses — because they are run by people who are oblivious to the realities companies face each day. Case in point is the news that there might be some budget money left over at the state capitol. Few businesses would spend profits or pay dividends without the money in hand, but that is what Gov. Dannel P. Malloy wants to do with a state budget “surplus.”

But there isn't a surplus — just the hope of one when the state's budget year ends on June 30. How did this fiscal miracle occur?

It wasn't due to a burst of consumer spending, investment, hiring and record sales — hallmarks of a robust economy. The whiff of a “surplus” is a function of revenue anomalies — hundreds of millions in estate taxes both from death and avoidance of new laws; four times more than expected from a tax amnesty program ($163 million); and a pop in the capital gains taxes from a fourth quarter Wall Street rally.

Malloy and the Democrats thought they would have a lot of cash after they put through a record $2 billion tax increase, borrowed millions more to fill budget gaps and ignored other commitments. They thought this combination, accompanied by a normal bounce in the economy would allow an across-the-board election-year tax cut. Now, Democrats are left with table money and have reverted to waving the bloody shirt of the minimum wage and income parity.

One Democrat — state Comptroller Kevin Lembo — has not gotten the Malloy memorandum on our economic recovery. A self-described “progressive,” Lembo doesn't color the sea of red ink that threatens to drown future generations. With a Sgt. Joe Friday manner, he sticks to facts — debt and long-term obligations cannot be ignored, let alone the $2 billion deficit for 2015-2016 that awaits. Lembo is the lone man who makes sense and he won't be compromised.

With Lembo urging caution and Republicans demanding tax cuts, Malloy rushed to get control of the issue by outlining what he would do with the surplus that may or may not be there — similar to telling all your co-workers what you will do when you hit Mega Millions.

Malloy wants to carve up his $500 million ticket by paying down some debt, putting some into the depleted state pension funds and then handing out $55 checks to everyday citizens. If that wasn't generous enough, Malloy shored up his political flank by offering retired teachers a tax break on their pensions while removing taxes on non-prescription drugs and hiking funds for the Earned Income Tax Credit for the poor. Malloy might have to win a Mega Millions and a Powerball to cover these markers.

Who can blame Democrats for thinking big and changing the subject? The recent economic news has panicked them. The state lost 4,000 jobs in December and had anemic private sector job growth for all of 2013. Foreclosures on private homes are still high and a recent private study showed that 40 percent of Connecticut's citizens are on the financial edge. The implementation of the national Affordable Health Care Act through a state exchange has created the same fear and loathing over the cost and availability of health care.

There will be more anger and instability this summer and fall when businesses decide whether to pay fines or send employees to the health exchanges.

Republicans are in a position to make the argument that the Malloy administration's economic policies have kept Connecticut at the bottom of every independent measurement of prosperity. The GOP can propose a host of pro-growth legislation or floor amendments to draw the contrast with Democrats and dare them to oppose cutting taxes, reducing spending or ending useless programs.

Malloy will stick to his script — that he inherited a poorly managed state with long-term commitments that were ignored; that he “made the tough decisions” to invest in our infrastructure, in people and “took care of the needy” along the way. Malloy will conclude that “while much work needs to be done” — you can count on a $55 check in the mail by Halloween.

That should pay for the candy and a rubber Barack Obama mask.

Chris Healy is the former chairman of the Connecticut Republican party and founder of Healy Strategy in Wethersfield. He will be writing an occasional column for the Hartford Business Journal.

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