Griebel’s first budget: Dip into ‘big buckets’

Though neither Gov. M. Jodi Rell nor the legislature did much to reduce the record-setting deficit bearing down on Connecticut 12 months from now, there’s no great mystery about how to solve it, according to Oz Griebel.

Griebel, who is fighting for the GOP gubernatorial nomination in the Aug 10 primary, says Medicaid-funded health care programs and public employee wages and benefits are obvious choices for cuts — not necessarily because they are the most deserving targets, but rather because they represent anywhere from half to two-thirds of all state spending.

• Second in a series on proposals by gubernatorial candidates to balance the budget

“We all know where the big buckets are,” Griebel said. “Those are the two big things you know you have to look at, but those are the toughest ones to go after.”

The Simsbury resident and former president of the Greater Hartford Metro Alliance, on leave for his campaign, said his first budget also would feature some hope for the future with modest investments in key neglected areas like transportation and economic development. But at the top of the agenda would be unpleasant choices.

About 30 percent of the $19.01 billion state budget that takes effect on July 1 is dedicated for state employee salaries and benefits. Add about $2.8 billion in grants to cities and towns — much of which is used to cover municipal labor costs — and payments  into the statewide teachers’ pension fund, and the share of the overall budget tops 50 percent.

With a projected $3.4 billion budget gap for the 2011-12 fiscal year that equals nearly 20 percent of that budget, and Griebel said the budget-balancing math only works if public-sector workers accept a reduction in their standard of living.

If that seems unfair, Griebel is quick to note that private-sector workers statewide have faced that, in the form of wage freezes and cuts, reductions in retirement plan contributions, increased health insurance costs or loss of jobs for the past three years. And the general public is getting tired of waiting for Hartford to correct the imbalance, he said.

“This isn’t just an inside baseball game anymore,” he said in an interview last week. “There are more people aware of the shift, the dramatic shift, in total compensation for public employees — federal, state and municipal — over the public sector.”

This public buzz, he added, is not aimed at scape-goating public employees. “I don’t think it’s just anger,” he said. “They’re saying, ‘Wait a minute. Can we sustain this?’”

Griebel said he’s not convinced state government needs to impose any layoffs, though he also insists he won’t sign away his right as governor to eliminate jobs, as Rell did as part of a concession deal with unions.

But it will be necessary to ask unionized state workers for concessions, and pressing a legislature expected to remain under Democratic control to suspend or modify binding arbitration rules to help cities and towns better control their own labor costs.

Though Griebel insists layoffs are not a forgone conclusion, he notes that streamlining government, consolidating agencies and trimming staff through attrition is.

Predicting his first budget would offer “a shock to the body politic,” Griebel said “It’s not like we’ll close one DMV office or eliminate three jobs in the Executive Branch. This is going to be dramatic stuff.”

That likely will mean privatizing more state services, Griebel said, a move that would put his administration on a collision course with some who argue the private sector plus public dollars often equals corruption.

Matt O’Connor, a spokesman for the State Employees Bargaining Agent Coalition, said Griebel’s philosophy runs opposite of the direction Rell and the legislature took in 2007 when they enacted the so-called “Clean Contracting” statute.

The legislation takes several steps to safeguard hundreds of millions of dollars worth of annual contract awards, including prohibiting outsourcing of “core government functions,” and requiring cost-analysis studies before other services are turned over to the private sector.

It was developed largely in response to the contracting-related scandal that drove Rell’s predecessor, ex-Gov. John G. Rowland, from office amid an impeachment inquiry. Rowland served 10 months in federal prison after admitting he accepted about $100,000 in gifts from state contractors and from his staff.

“We have a law on the books, a landmark piece of legislation, that helps protect consumers, businesses and taxpayers from waste, fraud and abuse that is often the result of privatization,” O’Connor said, predicting both legislators and the public would oppose a return to a system that Rowland exploited. “You need to look at more than just that low bid you may get from a private company for that first year of service.

Griebel said he also hopes to find savings by targeting the nearly $4 billion Medicaid account in the state budget.

Medicaid is a cooperative federal program that provides states with matching funds to assist with various health care programs for low- and low-to-moderate-income individuals. In Connecticut it helps support nursing home care, basic health coverage for  families, and health care offered through the state’s welfare program for single adults without children.

Reducing costs here could involve some difficult choices in tightening benefits for low-income families, but Griebel said savings also could be found by investing significantly more state resources on less costly assisted living home care for seniors who otherwise would turn to nursing homes.

Though he calls the $3.4 billion deficit he stands to inherit imposing, Griebel said it appears somewhat less imposing once it’s accepted that the shortfall — and the problems that created it — will not be reversed in one year, or possibly one term.

Still, several Democratic legislators have criticized the Republican gubernatorial field for refusing to concede that the problem cannot be solved without significant tax hikes.

Unlike his GOP competitors, Greenwich businessman Tom Foley, the endorsed candidate, and Lt. Gov. Michael Fedele of Stamford, Griebel will not rule out proposing tax hikes.

“Trying to find $3.5 billion worth of cuts, that’s daunting,” he said, adding that if he pledged to close it entirely with cuts, “I don’t know if I could look at myself in the mirror.”

But Griebel declined to identify which taxes he would be more apt to increase, saying his initial focus would be solely on reducing spending.

“If you raise taxes too high, you are going to drive people out,” he said. “The people who have the very most are the very same people who could most leave.

But numbers from the state’s tax agency showed the wealthy stayed put and posted record-setting earnings after the last income tax hike.

Department of Revenue Services tax data show adjusted gross incomes for households reporting annual earnings beyond $1 million shot upward by more than 230 percent between 2002 and 2007. Even after 2008, the worst year of the last recession, filers earning more than $1 million were 140 percent ahead of 2002.

The same tax data shows households earning less than $1 million finished 2008 just 21 percent wealthier than they were in 2002 during the last recession.

Griebel said he is comfortable with the current state income tax structure, with one exception.

Most income currently is taxed at 5 percent, though earnings above $500,000 for singles and above $1 million for couples are taxed at 6.5 percent. But it’s not income tax rate at the top end of the scale that Griebel finds objectionable.

Rather it’s two small exemption programs and the 3 percent rate levied against the first $10,000 to $20,000 earned that combine to ensure nearly all households earning less than $35,000 pay little or no income taxes.

Griebel said if he were even to consider asking more of the rich and of the middle-class, Connecticut’s low income families must pay some income tax as well.

“I think when people don’t pay taxes, they don’t play in the game,” he said. “They don’t have the same stake in the game that everybody else does. … I am someone who believes in some progressivity in the income tax. If we’re going downstream as well as upstream, I could be convinced there’s some validity in that.”

State Senate Majority Leader Martin M. Looney, D-New Haven, one of the legislature’s most vocal advocates for an earned income credit on the state income tax to help working poor families, predicted any tax changes aimed largely or exclusively at the low-income households would face overwhelming opposition.

“We’re the only state in the Northeast that doesn’t offer an earned income credit, which we know is very significant in helping low-income working families pay for the transportation, clothing, day-care and other necessities they need. It’s one of the best things we can do to reduce the poverty gap,” he said.

Looney called Griebel’s position “short-sighted” and said it would “absolutely exacerbate the problem” of trying to help poor families stay off government assistance.

Griebel also would not pledge to forgo borrowing, though he placed it in the same last-resort-category as tax increases when it came to budget solutions.

Rell and the legislature’s decision to balance their last budget with nearly $1 billion in borrowing has been challenged by critics as dancing around a fiscal restriction in Article 28 to the amendments the state Constitution that requires a balanced budget.

State officials argued the revenue bonds they used to support the current budget don’t violate that provision, since they would be paid off by a special revenue stream — a new surcharge on utility bills — and not from tax dollars received by the General Fund.

But former East Hartford Mayor Susan Kniep, president of the Connecticut Federation of Taxpayer Associations, said if Griebel turns to similar borrowing, he might escape a court battle since most grassroots taxpayer organizations lack the funds to wage one, but he would lose public support.

“Until someone can afford to actually take this to court, and goes beyond the court of public opinion, it probably won’t be resolved,” she said. “But I think most people think what they have done is not only illegal, it’s unethical.”

Griebel added there no doubt would be frustration voiced by many groups to any solution to the largest deficit in state history, but unlike current leadership at the Capitol, he won’t shrink from making tough choices — or explaining the reasons behind them to the public.

“This problem we’re facing in the state belongs to everybody,” he said. “I think that means there has to be an ongoing campaign of communication with the public. The bully pulpit has to be used. I think you have to be candid with the people.”

This is one a series of stories on gubernatorial candidates’ plans to address Connecticut’s budget crisis. Other stories covered Republican Tom Foley, Democrats Dan Malloy and Ned Lamont, and Independent candidate Tom Marsh.