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Democrats Playing Politics with State Budget
By State Rep. Richard Ferrari, East Granby
The longer the General Assembly's majority Democrats play politics and put off action on a responsible budget proposal, the more likely it will be that they will end up trying to eliminate projected state budget deficits through bonding—which will mean less state aid for school construction and other worthwhile local projects.
With Connecticut's projected deficit expected to amount to $650 million by the end of the current fiscal year and $1.5 billion by next year, it is absolutely essential that we make budget adjustments now. Every day state spending continues at current levels makes it more and more likely that what is termed a "projected deficit" today will turn out to be an actual deficit when the fiscal year ends on June 30. Since the state is constitutionally prohibited from spending more than the revenues it raises, if we do not have a budget agreement by the end of the fiscal year, the state could very well end up selling bonds to cover much of the revenue shortfall.
Although the Democrats who control the General Assembly have agreed to a vote on the Governor's proposal to address the deficit, which consists of spending reductions, various tax increases and contract concessions from the state employee unions in equal amounts, they are expected to overwhelmingly reject it. They also are expected to vote soon on their own tax-heavy proposal that reportedly would impose higher income tax rates (from 4.5% to 4.75% on couples earning $100,000 or more per year, with higher income earners paying an additional 0.25% until reaching a top rate of 5.75% for all income earned over $1 million). Also, under their proposal, a 15% surcharge would be imposed on corporate profits for the next 2.5 years, and the cigarette tax would go up by another 40 cents.
While their proposal is likely to pass the State House of Representatives and the State Senate, Governor Rowland will almost certainly veto it. And because Republican legislators like myself will not support a proposal that is heavily weighted toward tax increases and fails to make a serious attempt to bring state spending under control, there are not enough votes to override the governor's veto. The Democrat proposal is doomed to failure—and they know it.
Unless enough Democrat legislators who represent middle-class suburban constituents can be persuaded to abandon their liberal colleagues and support a proposal that brings state spending under control, it is entirely possible that we will not have a budget agreement by the time the legislative session adjourns, or even by the end of the 2002-03 fiscal year. At that point, the Democrat majority probably will choose to sell state bonds to raise the funds needed to help eliminate the deficit rather than make the more difficult decision to address it by making prudent reductions in state spending.
Borrowing to pay for operating expenses is a bad idea. It would take us right up to the statutory limit on bonded indebtedness, which would mean we could not sell bonds to provide financial assistance to local school districts to help them pay for new school construction projects, or to towns to help them pay for capital improvement projects. That could mean school construction projects in towns that already have been given preliminary authorization for state aid could have their funding put on hold for two to three years, and that municipalities currently seeking authorization for assistance for new projects could have their requests denied.
In addition, bonding to pay for operating expenses would be looked upon with extreme disfavor by bond rating agencies, which would almost certainly downgrade Connecticut's bond rating. That would mean we would have difficulty selling our bonds and would be forced to sell them at higher rates of interest. Connecticut already has one of the highest per capita rates of bonded indebtedness in the nation. Bonding to eliminate the deficit would increase that burden on our children and grandchildren. The Democrat majority should not take that step when the alternative of living within our means is available to us.
When we had our first major budget crisis in 1991 and the General Assembly remained in session throughout most of the summer because of the battle over adopting a budget in concurrence with implementing a state income tax, our state budget amounted to about $6 billion. Now, about 11 years later, we have one that totals about $13.5 billion. That means the burden on Connecticut's taxpayers has doubled since 1991 and is being shouldered by a population that has not increased significantly since that time.
This is a huge increase in government spending and one that clearly demonstrates the majority Democrats' complete indifference to the need to keep state spending under control. After Governor Rowland's tax reductions were adopted in the mid-1990s, as Connecticut's economy emerged from its prolonged recession and revenues began to pour into the state treasury and surpluses began to accumulate, the only question on the minds of the General Assembly's Democrats was how to spend them. During the latter part of the 1990s, the growth in state spending regularly exceeded the inflation rate.
Those of us who warned that the good times would not last forever and pointed out the need to restrain state spending were ignored. When the economy began to cool in 2000 and the stock market bulls turned into bears, families tightened their belts and spent their money only on essentials.
Thousands of private sector jobs once again were lost through layoffs, state revenues dropped, the surpluses disappeared and budget deficits reappeared. Now, when the economy is beginning to show some signs of improvement, is the wrong time to increase taxes or to irresponsibly borrow money to pay off our deficit or fund operating expenses that should be paid for from the general fund. We need to establish state spending priorities and hold the line on spending on programs and services that are not absolutely necessary. Increasing taxes will act as a drag on the economy and could halt the recovery in its tracks.
If we are patient and make common sense reductions in state spending now, the recovery will continue and we will emerge from the current slump with an economy that is healthier than the one we enjoyed during the boom years of the 1990s.
Mr. Ferrari represents Connecticut’s 62nd District, which includes the towns of Barkhamsted, East Granby, Granby and New Hartford.
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