Gov. Dannel P. Malloy assured business leaders Wednesday that neither the state’s fiscal woes nor political gridlock on Capitol Hill would stymie his efforts to revitalize Connecticut’s economy.
Addressing hundreds of owners and executives gathered for Business Day in the Legislative Office Building, the governor also insisted he would balance state finances without hiking taxes or exceeding the constitutional spending cap — two objectives that drew a somewhat skeptical response.
“I am convinced Connecticut has a role to play in our national economy, (and) our international economy,” Malloy said.
As he often does, Malloy again reminded his audience of the huge fiscal challenges he inherited when he took office in January 2011, including:
A $3.67 billion deficit built into 2011-12 finances, a gap equal to roughly 17 percent of annual revenue at the time.
Major funding shortfalls in pension and retirement health care programs for state workers.
A modified cash accounting system riddled with gimmicks that effectively left state finances owing itself as much as $1.7 billion.
A job market that gained no net new jobs over the prior 22 years — a distinction matched only by one other state, Michigan, which saw the automobile manufacturing industry decline dramatically.
And a host of severe storms and other weather events that led to five natural disaster declarations.
“It has been a tough couple of years,” Malloy said.
Recalling Mark Twain’s description of Connecticut as the “land of steady habits,” the governor said “unfortunately we stayed steady for too long. … We failed to build upon our strengths and we failed to address our weaknesses.”
Despite more than $1.5 billion in new taxes, a union concession package and other spending cuts in 2011, state finances remain on pace for nearly $1.2 billion in red ink for the fiscal year that begins July 1.
Still, Malloy was optimistic Wednesday that new budget he proposed to the legislature last month would close that gap.
“A balanced budget is in reach within normal channels,” the governor said.
Malloy added that this plan focuses spending on his top priorities, education and job creation. It also would restore a sales tax exemption for modest clothing purchases and would eliminate municipal property taxes on motor vehicles.
The governor also proposed a major bonding initiative to dramatically expand the engineering program and enhance research initiatives at the University of Connecticut.
“This is a plan, folks,” Malloy added. “This is what I’m committed to: not raising taxes and living within the spending cap.”
Malloy’s budget would raise an extra $139 million in taxes next fiscal year from corporation, electricity generation and insurance premiums taxes. The governor argues that since this money comes only from extending existing rates or credit limits otherwise set to expire, it therefore doesn’t count as a tax hike.
But Peter Gioia, chief economist for the Connecticut Business and Industry Association, said Malloy’s definition of taxes doesn’t match those of many business leaders. “They’re not sunsetting taxes they said they would sunset,” he said. “There’s going to be a fight there.”
And while Malloy noted his plan adheres to the spending cap, he failed to mention this only would happen if a series of rule changes he proposed are adopted. Otherwise, the proposal bursts the cap by $466 million next fiscal year and by $691 million in 2014-15.
Gioia said the spending cap also remains a main concern, adding that controlling spending is the best way to eliminate red ink and stabilize state budgets in the future.
Still, the president and CEO of the CBIA, John Rathgeber, praised Malloy for his priorities, particularly investments in education and job development.
“I know a lot of us have great respect for the governor’s leadership, … for his vision for Connecticut’s future,” said Rathgeber, whose group organized the Business Day activities.