Gov. Dannel P. Malloy is one of about 30 governors facing budget shortfalls, a cold comfort as he approaches a re-election campaign with the task of explaining why a record $1.5 billion tax increase in 2011 failed to keep Connecticut in the black.
The Democratic governor is confronted with a double-barreled political challenge: Still facing Republican criticism over last year’s tax increases, Malloy now has to persuade Democrats to accept deep spending cuts.
“I assume they will be unhappy,” said Roy Occhiogrosso, his senior adviser. “The governor is not happy to have to propose them. There is no disagreement. He has a job to do, and he is trying to do it as carefully as possible.”
The Malloy administration took the first of three steps Wednesday to address two projected deficits: $363 million in the current fiscal year and $1.1 billion in the next one, beginning July 1.
Malloy’s budget director, Benjamin Barnes, detailed $123 million in cuts the governor can make unilaterally, most of them coming from higher education and social services.
Next month, Malloy must present a plan to save at least another $240 million — cuts he cannot make without legislative approval. In February, he will propose a budget addressing the larger gap in the next fiscal year.
How those fiscal challenges are met likely will determine Malloy’s political standing as he looks toward re-election in 2014.
Every campaign is a conversation, framed by a narrative. Long before voters recognize that a gubernatorial campaign is taking form, Republicans and Malloy are establishing and reinforcing competing story lines.
Occhiogrosso, the administration’s messaging guru, stood with Barnes on Wednesday afternoon, trying to frame the state’s fiscal situation as a challenge that arises from an anemic national economy, not a crisis resulting from a Malloy misstep.
The message that voters and legislators can expect to hear throughout the 2013 legislative session and beyond is that Malloy took office in January 2011 facing a projected deficit of about $3.6 billion, the nation’s largest per-capita shortfall.
Occhiogrosso rarely fails to note that the current-year gap is just one-tenth that size, glossing over that the projected $1.1 billion shortfall for the next fiscal year is nearly one-third the deficit Malloy inherited.
Barnes addressed himself to the micro. He stood ready to answer questions about cuts: $17,500 for veterans’ headstones; $12,958 for mosquito control; $14,174 for the Beardsley Park Zoo; $3,787 for the Greater Hartford Arts Council; $9,809 for venereal disease control. The list was long.
Occhiogrosso urged reporters to take a macro view.
“I think to look at any one of these cuts in isolation misses the larger point,” said Occhiogrosso, who handled messaging for Malloy in 2010. “And the larger point is that this governor inherited an enormous mess. It took 20 years to dig that hole. It’s going to take more than 20 months to dig out of it.”
His secondary message is that most governors, whether they are Democrat or Republican, whether they relied on tax increases or spending cuts in 2011, are seeing revenues fall short of expectations. Economic growth this year was just 1.9 percent, about half of expectations.
The GOP line is easier: Malloy relied too heavily on taxes, and it didn’t work.
“I hate to say I told you so. I’m not that kind of person,” said Tom Foley, the Republican who lost to Malloy two years ago in Connecticut’s closest gubernatorial race since 1954. “But I told you so.”
He has been telling audiences for weeks he is eager for a rematch.
But Foley, who promised to erase the $3.6 billion deficit without raising taxes, was even more reliant than Malloy on economic growth to generate more revenue through existing taxes.
Wouldn’t he then be facing even a bigger budget shortfall if he had won in 2010?
Not so, says Foley, a disciple of supply-side economics. In his view, Malloy’s tax increase choked economic growth.
“I’m saying you’d have more growth in the Connecticut economy if you followed my plan, which was not to raise taxes,” Foley said.
Foley also proposed reforms that were politically difficult, if not impossible, including the repeal of binding arbitration for public employees and privatization of many public services.
“His proposal was a joke, a complete and utter joke — smoke and mirrors, and not even good smoke and mirrors,” Occhiogrosso said. “Even if you believe the cuts, and many of them couldn’t be made, he was still a billion and a half dollars short.”
Foley said Malloy relied on his own smoke and mirrors by overestimating savings to be achieved by a new employee wellness plan the administration negotiated as part of a concession deal in 2011.
Ed J. Deak, a Fairfield University economist, said politicians of all stripes tend to be bullish on economic growth and the value of anticipated savings when confronted with a massive deficit.
“When you put together a budget package that takes care of such a large projected deficit like you had in Connecticut, you are going to try to stretch the envelope as much as you can and still make it reasonable. ‘The economy will be better. There will be more income generated.’ That’s part of it,” Deak said.
In Louisiana, Gov. Bobby Jindal, a potential GOP candidate for president in 2016, will be addressing his plan to close a $1 billion gap in February, the same month Malloy will present his next budget.
Weeks ago, Malloy pointed out that Republicans in 2011 accused him of a far different fiscal offense: They claimed that his $1.5 billion tax increase was unnecessary, a calculated ploy to generate huge surpluses before the 2014 race for governor.
Some independent analysts shared that assessment, saying even a mild uptick in the economy — a good bet based on previous economic cycles — would leave Connecticut awash in cash.
With a rueful smile, Malloy said, “They were wrong.”