Malloy vows to tackle fiscal mess ignored by Rell, legislators

In increasingly blunt talk about the state’s fiscal crisis, Governor-elect Dan Malloy says his Republican predecessor, M. Jodi Rell, and the Democrat-controlled legislature clung to futile hopes for a quick economic recovery instead of making long-needed structural changes to Connecticut’s operations and finances.

“They should’ve been done earlier. They should have been done by the governor,” Malloy said in an interview with The Mirror in his transition office at the State Capitol. “They should have been done by the legislature. Now I have to do them.”

Malloy offered a view of the state’s multi-year fiscal crisis that is sharply at odds with his fellow Democrat, House Speaker Christopher G. Donovan of Meriden, who has largely blamed the crisis on the recession and resisted calls for sweeping changes.

In public speeches and private conversations, Malloy said he is making the case that legislators are wrong if they believe Connecticut can take stop-gap measures and then wait for a rebounding economy to erase a deficit of more than $3.5 billion

“They had the hope that this recession would be like other recessions, that the recovery would be well under way right now,” Malloy said. “Now, I never agreed with that. I never supported that.”

Despite his blunt language, Malloy said he is casting no blame or criticism at anyone who has been hoping that an economic recovery would save the state from painful spending cuts and tax increases, a pattern followed after most previous recessions.

“It doesn’t mean that they were evil, it just means that they were wrong,” Malloy said.

Rell proposed a budget for the fiscal year that began July 1 that guaranteed the next governor would face a deficit. Her proposed $18.9 billion budget for the 2011 fiscal year was based on $2.7 billion in one-shot revenue, including federal stimulus dollars, reserve funds and borrowing against future revenue.

In a speech Monday to the House Democratic majority, Malloy said he wanted to acknowledge that many Democrats have pinned their hopes on a recovery. But they must embrace a tougher reality, he said.

“We’ve got to turn the corner on that, and our aspirations are undoubtedly going to be delayed. Those were two very pointed messages,” Malloy said.

Other than acknowledging he intends to propose a mix of new taxes and spending cuts, Malloy has declined to spell out what he means by structural changes. The details will come in his first budget proposal in February, a month after he takes office as Connecticut’s first Democratic governor in 20 years.

Donovan, who is completing his first term as speaker, resisted calls for fundamental changes in the state’s budget this year, saying that a combination of federal stimulus money and an improving economy could get the state through the crisis.

“Unfortunately, Dan wasn’t the governor then,” Donovan said Wednesday. “Now, we’re going to make those changes.”

Donovan said state revenues have picked up, but not enough to offset rising costs for Medicaid and other services. With the Republican takeover of the U.S. House, Donovan said he no longer is expecting more federal help.

“That’s a big change. We need to react to that change,” he said.

In an interview late last February, Donovan did not accept that government must downsize or that the state needs to renegotiate state employee benefits to reduce the state’s unfunded liability for pensions and retiree heath costs.

“I think in some ways government is the whipping boy for other structural changes that have to take place,” Donovan said then. “The Obama administration is right to look at health care. That’s a major cost.”

Donovan said unwarranted negativity is itself a drag on the economy.

“I think some people, constituencies hurt themselves by trying to make this worse. They don’t look for the silver lining,” Donovan said in the February interview. “They look for the most negative thing. In some ways putting out that attitude, throughout the state, throughout business, throughout the community, it hurts our recovery.”

Malloy said Donovan was hardly alone in viewing the recession as something the state could merely outlast.

“In fact, I think all but a handful of people in that room fall into that category. They are not bad people,” Malloy said of the House Democratic majority he addressed Monday at the Hartford Hilton. “It means that they were optimistic. They were overly optimistic.”

Malloy said he was not being critical of what failed to happen in the past; he is trying to focus the legislature and public on what must happen today.

“I have to acknowledge that no one acted out of malice. That’s my message. It’s not that I’m being critical of other people. I was acknowledging their good intentions.”

After Malloy addressed the House Democrats at a luncheon retreat Monday at a hotel in downtown Hartford, Donovan stood next to the incoming governor and pledged a partnership.

“We’re looking forward to working with the governor, facing the deficit squarely and saying, what do we have to do? What are the ideas?” Donovan said.

“There’s going to be disagreements,” he said, standing outside a room where most of 101 Democrats in the House had just applauded Malloy.”There are disagreement among the 100 people in that room right there, but we have dialogue.”