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To the Editor,
As the year ends, we can expect much national attention to focus on the fiscal cliff. Among the primary related questions is whether, and how much, to cut the federal deficit.
In Connecticut, where a balanced budget is required by law, the question isn’t how much to cut the deficit, but rather how to eliminate it.
Answering that question is now urgent, because figures released a week after the elections by the executive branch’s budget office show a $365 million current deficit for fiscal 2013. This is six times greater than the deficit the state comptroller projected in his November 1 report.
What’s behind the deficit? Sales, income and corporate tax revenues are down by about $230 million, and other revenue sources by another $30 million. While the revenue shortfall is offset by a gain of $130-$150 million in federal aid for the Medicaid program, these funds are available only because of increased demand for Medicaid services, which, in turn, has led to a $260 million increase in projected Medicaid expenditures.
The administration attributes these developments to the slow recovery of the national economy, but there is clearly more at play in Connecticut. A report released in August by the Connecticut Center for Economic Analysis suggested that our state “was still contracting when the rest of the nation was beginning to recover,” noting that there are now fewer jobs here than in 1988. Connecticut in fact lost 2,800 jobs over the past year, and unemployment has once again reached 9%, compared to 7.9% for the country, and 7.1% for New England.
According to Moody’s, which downgraded Connecticut’s bond rating earlier this year, the state’s financial health is also seriously compromised by high debt levels, over-reliance on tax revenues from volatile investment earnings, and daunting unfunded liabilities. Just this month, Conning Inc., a Hartford-based financial research company, ranked Connecticut dead last in terms of credit quality.
While borrowing and tax increases were the methods chosen by the legislative majority for closing our state budget deficits this past year, and too often before, those choices have placed the state on increasingly shaky financial ground. In the case of the current budget, the state’s largest-ever tax increase hasn’t come close to covering spending ‒ partly because much of the year’s anticipated tax revenue hasn’t materialized, but chiefly because state spending has actually increased by more than $1 billion during fiscal 2012 and 2013.
Not only are taxpayers still reeling from that tax increase, but it also hasn’t produced its intended results. Raising taxes further is not an acceptable solution. This leaves cutting spending, an exercise that is long, long overdue.
What happens next? If the state comptroller certifies the deficit on December 1, Gov. Malloy must submit a deficit mitigation plan to the General Assembly within the month. Legislative action is generally necessary to close a deficit of this size. Legislative leaders of both parties have called for a special session, and it seems likely we will convene during the week before Christmas. This would be a wise decision. Since state agencies receive quarterly allotments, and the third quarter begins in January, the potential for spending cuts will be dramatically reduced after year-end, as significant funds will have already been disbursed.
Last year, as a member of the Appropriations Committee, I helped craft a no-tax-increase alternative budget that preserved funding for education, towns, and essential social programs and services while cutting spending by more than $1 billion. Although it didn’t pass, it offered many proposals that are worth reconsideration now.
I hope to have the opportunity to discuss those proposals in depth with colleagues across the political aisle. Thoughtful proposals are thoughtful proposals, regardless of where they come from, and the people of Connecticut deserve to benefit from all that are available. If all legislators start working together now on a joint solution, the special session can be a truly constructive exercise that will move the state in a positive direction.
That would set a fine bipartisan precedent for the critical budgeting work before us in the 2013 regular session, when we will face a projected deficit of more than $2 billion for the next biennium.
State Rep. Gail Lavielle (R-143rd District)