Marsh finds independence liberating when trying to solve Connecticut’s budget crisis

Waging an independent campaign for governor, Tom Marsh doesn’t have access to the funding, volunteers and other resources routinely available to major party candidates.

But the Chester first selectman, who abandoned his bid for the GOP nomination three months ago, said there’s one advantage to not having to woo party insiders: He can tell voters the truth about the largest budget deficit in state history.

• Facing the budget: Fourth in a series

“You have to adhere to the party rhetoric in order to get the attention of the rabid followers, and that’s who makes up the town committees,” Marsh said in an interview last week. “I don’t think the solutions to the state’s problems are going to be found in either party’s rhetoric, yet that’s the system we have here.”

For Marsh, running as the candidate of the Independent Party of Connecticut frees him to talk about solutions he’s convinced will infuriate hard-core Democrats or Republicans – and in a few cases both.

It means a higher tax burden, including higher rates for the rich and a modest new contribution from the poor, as well a repeal of some of the myriad tax credits and exemptions for special interests.

It also means continued downsizing of state government, and wage freezes at the state and municipal levels, while still preserving local control over the most important decisions.

Most importantly, Marsh said, it requires a governor willing to use the bully pulpit as never before, exposing legislators, unions, special interest groups or any others trying to shield sacred fiscal cows to severe public scrutiny.

“I was getting more and more uncomfortable in presenting my positions to town committees” before mid-April, Marsh said, referring to the time he was still seeking the GOP nomination. That meant repeating the mantra Republican contenders like Tom Foley and Michael Fedele continue to offer: namely that a deficit equal to almost 20 percent of this fiscal year’s $19.01 billion budget can be closed without tax hikes.

Similarly frustrating, Marsh said, is the way Democratic contenders Dan Malloy and Ned Lamont speak in general terms of seeking labor concessions, without telling the public sector or the voters what type of savings they realistically hope to achieve as governor.

“Failure is pre-ordained,” he said, for “anybody who is arguing for the status quo.”

What isn’t status quo is the $3.37 billion deficit that nonpartisan legislative analysts say is built into the 2011-12 budget, the first financial plan that Connecticut’s next governor must begin crafting shortly after taking office in January.

That projected shortfall is the largest in state history, both in terms of sheer dollars and as a percentage of current expenditures. On paper, the $4 billion deficit that Gov.M. Jodi Rell and the legislature closed last September on the way to adopting last fiscal year’s $18.64 billion budget was larger. But just under half of that gap was closed with budget reserve and emergency federal stimulus grants, two resources that will be exhausted before July 2011.

Rell and the 2009 legislature also employed $952 million in new tax and fee revenue to balance this fiscal year’s finances.

Unlike most Republicans, Marsh concedes tax hikes would be part of his solution, and unlike candidates from either party, the Chester first selectman, will even estimate how much in new revenue he would need.

Though Marsh said his first goal, like all candidates, is to exhaust efforts to cut spending first before looking at extra taxes, he said a fair guess on his ratio would be 60 percent spending cuts and 40 percent new revenue.

“I think everybody in Connecticut, at least for the short-term, is going to be paying more,” he said. “You want to call that a tax increase or revenue restructuring, whatever – there it is.”

It’s there, Marsh continued “because we’ve committed ourselves to obligations that whether we like it or not we have to fund.”

But the third-party candidate was quick to add that doesn’t mean any segments of his budget are beyond spending cuts. Just the opposite: the Marsh administration would take aim at areas that Rell and others have shied away from because they were deemed too politically risky.

About 50 percent of this fiscal year’s budget is tied to two areas: state employee salaries and benefits, and municipal grants. There’s no way to dramatically reduce spending without affecting state and municipal employees, Marsh said.

“They are going to share, I’ll say, a significant amount of the burden” of closing a nearly $3.4 billion deficit. “I think it’s probably going to be somewhere shy of $1 billion.”

Marsh concedes that can’t be done without approaching state employee unions for concessions.

It also can’t be done without calling upon municipal unions, both general government workers and public school teachers, to make contract concessions. But Marsh doesn’t like the position Republicans like Foley and Oz Griebel have taken, offering to support a suspension of binding arbitration, — not because it wouldn’t help towns, but because there’s almost no chance of pushing it through a legislature likely to remain under Democratic control.

“We’re not going to get rid of binding arbitration and anybody who’s coming to the table with that attitude is not going to have any credibility” in labor talks, he said.

The real solution, Marsh said, lies with the governor taking three steps:

• Asking the legislature to reduce municipal aid.
• Instructing town leaders to seek the same concessions from teachers and general government workers that Marsh would seek from state employees.
• And making a direct appeal to the public to put pressure on anyone who won’t cooperate.

“The key to success for any of my ideas is a strong bully pulpit, holding the legislature and anybody who’s opposing this publicly accountable,” Marsh said.

But former state House Speaker James A. Amann, D-Milford, who was House majority leader in 2003 when Connecticut’s last across-the-board income tax hike was enacted, said a strong bully pulpit approach only goes so far. Former Govs. Lowell P. Weicker Jr., who secured adoption of an income tax in 1991, and John G. Rowland, who signed the 2003 increase, both knew how to work with legislative leaders.

“You’ve got to be able to build a coalition of support and sometimes it just comes down to leadership,” said Amann.

Though the former Milford lawmaker voted against the income tax in 1991, he said “you’ve got to give Weicker credit for having the guts to go forward.” Only by first establishing a base of support through negosiations with the Democratic majority was the third-party governor “able then to pick off the other individuals he needed to get the votes for the income tax,” Amann said.

And in 2003, Democrats wanted an income tax hike aimed primarily at the wealthy while Republicans opposed any increase. Rowland, a Republican, “still had the credibility” to convince leaders from both parties to keep the tax largely flat, and boost the main rate on nearly all income from 4.5 to 5 percent, Amann said. “People still felt at that time he could put a deal together, and he did,” he added.

Though Marsh wouldn’t rule out the possibility of layoffs in his administration, he also said he believes many public-sector workers want to make concessions because they know the alternative is dramatic downsizing. “The rank-and-file is not particularly excited about the specter of big layoffs,” if there are no givebacks. “And we’re not talking about 5 percent. We’re talking maybe 15 percent.”

“There’s public support for the premise that if nobody else is getting a raise – in fact most people (in the private sector) are getting a cut or at best a freeze – that this should be the same for our public employees,” he added. “There’s going to be a reduction in municipal aid in the coming years. So whether I’m telling you to freeze your wages at the local level or not, you’re not going to have the money from the state to continue the status quo.”

But one union official who works with both state and municipal bargaining units, said the Chester first selectman should know town budgets already have been stretched thin by a decade that saw state aid, on average, grow at a very modest pace.

“He ought to understand that what municipalities need is more support from Hartford and from Washington, not less,” said Matt O’Connor, a spokesman for the Connecticut State Employees Association/Service Employees International Union. The organization represents more than 6,000 city and town hall workers, public works crewmen, engineers, road maintenance workers and school paraprofessionals across Connecticut.

O’Connor predicted any dramatic drop in state aid would spark outrage from overburdened town governments. “You make a bad situation far worse, ” he said.

But Marsh isn’t looking to tighten costs only on labor.

Though candidates are leery to discuss social service cutbacks, Marsh said that portion of the state budget is too large to spare entire from the fiscal knife. Medicaid-programs alone represent nearly $4 billion in spending this fiscal year, or 21 percent of the total budget.

Those programs where health care or other benefits far exceed those levels provided in other states have to be subject for review, Marsh said, adding the Connecticut also might need to privatize more programs to control costs.

“For me it all comes down to the best value,” he said.

Consolidation also is an effective tool to save money, but state government has to look beyond simply merging agencies – an option that sometimes creates more bureaucracy than actual savings, Marsh said.

Rather, he added, the next administration should look to merge or share common functions and services provided by related agencies – particularly those involving social services, education and health care. “There’s a lot of opportunity for synergy, consolidation and savings there,” Marsh said, regardless of whether two entire agencies end up under one heading when all is done.

But no matter how many consolidations are achieved and labor concessions are granted, the next governor will be trying to reverse two decades of spending that generally has outstripped inflation, Marsh said, adding the budget can’t be balanced without new revenues – and every candidate knows it.

When it comes to the income tax, the single-largest revenue source in the state budget at $6.7 billion this year, Marsh is prepared to infuriate politicians across the political spectrum. He wants more from the wealthy and the poor, and doesn’t rule out asking the middle-class to chip in extra as well – just not all in the same proportion.

“I do believe with the quality of life Connecticut offers we can be a little more progressive in our taxation,” he said. “I don’t buy into the premise that if we raise it a little bit we are going to lose all of our affluent tax-paying base.” The income tax currently levies a rate of 5 percent on most income, though earnings above $500,000 for individuals and $1 million for couples are taxed at 6.5 percent.

Similarly, because of a small personal exemption and a 3 percent rate charged on the first $10,000 of taxable income, most households earning less than $35,000 pay little or no state income tax. Marsh–like Republican candidate Griebel– said he would impose a marginal tax that would make a big difference in terms of fairness.

“It has to be a much broader base, which is certainly going to crank up the whole Democratic side” of the legislature, he said, adding that asking low-income families to contribute even $5 per week would help wealthier households contributing far more to feel better. “Everybody has to have some skin in the game.”

Another thing that may help residents and businesses grudgingly accept tax hikes, Marsh said, would be the repeal of many of the dozens of credits, exemptions and other tax breaks on the books.

Connecticut has more than $5.3 billion worth of these breaks, including more than $3 billion on its sales tax alone, according to the 2010 Tax Expenditure Report, a biennial assessment prepared by the legislature’s nonpartisan Office of Fiscal Analysis.

Some breaks, such as basic sales tax exemptions on groceries and prescription medications, would be preserved, Marsh said, but many others would go. “We may see some lower rates, but on more items and with more people paying.” he said.

Though cities and towns would be asked to help balance the next budget, they also should benefit from any state tax reform, Marsh said. That means that while there would be an overall increase in state taxes, he also would favor carving out new revenue-sharing programs, giving towns a portion of the sales or even income taxes collected in their borders.

That change, coupled with a concerted effort to end many of the unfunded mandates passed onto towns by state government, would help communities plan their own routes toward eventual fiscal stability, he said.

Marsh said he couldn’t pledge to leave untouched arguably the most popular tax break on the state’s books, an income tax credit worth up to $500 for middle-income households to offset local property taxes.

“We’re all in this mess, we’ve all go to get out of it,” he said. “Otherwise you’re going to find yourself back in the same cauldron of discontent that is going to have everybody up and screaming and nobody working in the same direction.”

This is part of a series of stories on gubernatorial candidates’ plans to address Connecticut’s budget crisis. Other stories covered Republicans Oz Griebel and Tom Foley and Democrats Dan Malloy and Ned Lamont.