Questions about Connecticut’s economic challenge — and answers
Why does Connecticut keep having budget shortfalls?
Revenue growth has been falling since 1989 and bottomed out in 2017.* Prior to 1989, average revenue growth was over 10 percent per year.** A 10 percent gain in general fundÂ revenue today represents 2 billion dollars, an amount which would cover recentÂ annual shortages.
Source: *DRS Annual Reports- Connecticut Department of Revenue Services website ** VolatileÂ Income Tax Revenue Stumps States, Elaine S. Povich, Stateline, Pew Charitable Trusts.
Is government spending excessive?
State and local spending is rated as 46th out of 50 states in relation to theÂ stateâ€™s total income (Gross State Product) and has been lean for decades according toÂ a Connecticut Voices for Children Study.
Source: Report: Connecticut has greater capacity to support public investments in children, Wade Gibson, J.D., Fiscal Policy Center, Connecticut Voices for Children, February 2014
What about those claims of millionaires leaving the state?
Millionaires have increased by over 3,000 since 2004 and that number also includes multi-millonaires as shown by Connecticut DRS annual income reports. This is partÂ of a national trend in which millionaires are increasing at more than five times the rateÂ of the population growth.
Source: Edward N. Wolf, in Economy is creating millionaires at an astonishing pace. But whatâ€™s it doing for everyone else?, Christopher Ingraham, Washington Post, 12/8/17.
Where is all the new wealth coming from?
In Connecticut, much is derived from the lucrative business model used by CEOâ€™s,Â hedge and private equity fund managers to â€śextract valueâ€ť from businesses they control. The model involves borrowing money, paying themselves hefty fees,Â outsourcing jobs, cutting research and development, laying off workers and buyingÂ back stock to raise the value of stock options. Once maximum value has beenÂ extracted over the short term, companies are often lacking the financial and humanÂ resources for sustainable growth.
Source:Â Runaway Inequality, An Activistâ€™s Guide to Economic Justice, Les Leopold, 2015.
Why isnâ€™t all this new wealth helping the stateâ€™s economy?
â€˘ That is because â€śjobs donâ€™t come from rich people,â€ť they come from broad based incomes being spent, and those incomes have been eroded for over a generation. Much of the wealth acquired by hedge fund managers and wealthy investors is saved or invested. There is little broad based distribution of profits and thereforeÂ little spending in the real economy.
William Buhler, of Cromwell, worked at the Connecticut Juvenile Training School as a school psychologist and isÂ co-chair of legislative action for SEIU/CSEA.
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