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The Choice: Real Cuts, or Tax-Hike Insanity November 5, 2009 October 26: Moody’s Investors Service downgrades the outlook of Connecticut’s general-obligation bonds from “stable” to “negative.” According to the agency, its change “reflects the choices made to address the state’s biennial 2010-2011 budget gaps as well as the shortfall for fiscal 2009, including a majority of non-recurring solutions and deficit financing, combined with a credit profile that includes significant long-term liabilities.” November 2: Connecticut Comptroller Nancy Wyman confirms that the budget adopted by Governor M. Jodi Rell and legislative leaders will not balance the state’s books. Due “mainly … to continued weak receipts of the income tax,” Wyman estimates the current fiscal year’s deficit is $624 million. November 4: The (Waterbury) Republican-American’s Paul Hughes reports that Connecticut is set to borrow $900 million from the federal government to replenish its busted unemployment-insurance fund. In the last two years, weekly jobless claims rose from 40,000 to 100,000. A bureaucrat with the state’s Department of Labor calls the situation “phenomenal.” See a trend emerging? Having employed every reality-avoidance tactic possible, Connecticut’s policymakers are left with a choice: Cut spending -- broadly and deeply -- or enact another round of brutal tax hikes. Pols can no longer pretend that the economy will experience a dramatic rebound. (Only Obama cultists believe that claptrap.) They can’t count on another shot of federal “stimulus.” (Washington ran a $1.4 trillion deficit in its just-ended fiscal year.) They’ve already assigned the state’s budget reserve to cover projected gaps in 2010 and 2011. Estimates for the general fund’s “out years” are terrifying. The legislature’s Office of Fiscal Analysis envisions a tsunami of red ink: $2.9 billion in 2012, $3.0 billion in 2013, $3.1 billion in 2014. And looking further into the future, Connecticut’s long-term unfunded liabilities are well over $60 billion. So the days of a phony “hiring freeze” are over. So are hoped-for efficiencies attained through consolidations and mergers of departments. “Economic recovery notes” and “securitization” of future revenue? Already in the works. With Nutmeggers facing the worst cost of government in the nation, tax hikes can’t be on the table. Leftists got their long-sought “millionaire’s tax” this summer, as well as a raft of other dunderheaded “revenue enhancements” -- a massive cigarette-tax hike, a corporate-tax surcharge, and higher fees on everything from package stores to saltwater fishing. The only solution left is on the expenditure side. And what a target-rich environment it offers. State spending, adjusted for both population and inflation, quintupled between 1970 and 2005. (If you were living in Connecticut during the Apollo era, do you receive five times as many “services” today?) Claims that the state has already “cut to the bone” are absurd. The budget adopted for this fiscal year is a decrease of only 1.1 percent. Next year, expenditures are slated to rise by 1.9 percent. Municipal pols who whine about declining state aid have little data to support their assertion. The current budget reduces local-government subsidies by a paltry 2 percent. “Human services” is the most promising area to start. Connecticut’s elites still swallow Great Society balderdash about their ability to “cure” poverty, as if it were a disease rather than the predictable product of illegitimacy, substance abuse, and laziness. It would be difficult to find a state that provides more-generous welfare programs. Education, from preschool to Ph.D., also represents a huge portion of the budget. Taxpayers have gained very little from the massive infusions of money they were forced to commit to elementary and secondary schools in the 1980s, and even less from “investments” in higher education in the 1990s and this decade. Failed experiments in “economic development,” which frequently line the pockets of politically juiced businesses, should be eliminated entirely. Unfortunately, one major expense is temporarily untouchable. An asinine agreement reached between the Rell administration and its employers -- er, “employees” -- exchanged minor concessions for the promise of no layoffs until 2011. The deal was thoroughly unjustifiable, given that the number of state bureaucrats rose by 10.4 percent between 2003 and 2008. (Population growth was meager, as was job creation in the private sector.) The state’s annual payroll costs have risen past $4 billion. Pension and healthcare obligations, including retirement for government-school teachers, add nearly $3 billion. Had the governor not caved to public-employee unions, personnel cuts would have already yielded big savings. For now, right-sizing the state’s workforce will have to wait. But there’s no shortage of opportunities elsewhere. Out of money and out of alternatives, Rell and lawmakers need to slash the cost of government. Now. D. Dowd Muska is a writer, commentator and lecturer. His website is www.dowdmuska.com. # # # # #
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