Gov. Ned Lamont, Treasurer Erick Russell and lawmakers pitched Connecticut’s born-again faith in fiscal discipline to investors Tuesday, contrasting the state’s bipartisan approach to budgeting with the standoff in Washington that puts America in danger of defaulting on its debt.
The setting was the inaugural Connecticut Investor Conference organized by Russell, drawing an audience of 300 that the governor and treasurer say is influential in how the state’s finances and economy are viewed by Wall Street, bond rating agencies and investors across the country.
“I’m not just selling bonds. I’m selling Connecticut. These guys are out there, they talk to the business community. They talk about what’s going on with Connecticut. ‘What do you hear?’ These guys can be our greatest salespersons or just the opposite,” Lamont said. “And I want them as bullish on Connecticut as I am.”
The conference at the Connecticut Convention Center in Hartford came a week before Connecticut is going to the bond market to borrow $710 million and as the Lamont administration is trying to close negotiations with lawmakers over a tax-and-spending package for the biennium that begins on July 1.
“We are so close,” Lamont said about the budget talks.
Russell and Lamont each characterized Connecticut as a state that has made a financial turnaround, adopting fiscal guardrails in 2017 and renewing them in February on unanimous and bipartisan votes. They glossed over some of the resulting tensions, particularly among Democrats who find them too confining.
“You’ll hear about how Connecticut transformed itself in recent years into a model of fiscal responsibility through a series of budgetary guardrails,” Russell told investors in his opening remarks. “Connecticut is on the rise. In recent years we have filled our rainy day fund to capacity, erased billions in pension debt, generated record budget surpluses and made critical investments to generate sustained economic growth.”
The guardrails include a volatility cap that requires revenues above a certain threshold to be set aside for budget reserves, up to 15% of the general fund budget. Once the limit is reached, excess revenue from volatile sources, most notably the income tax, must be used to pay down pension debt.
Despite its recent unfamiliar string of budget surpluses — another one is projected for the current fiscal year — and low unemployment, Connecticut still is trying to shake off a reputation as an expensive place to do business with high taxes and high debt.
CNBC ranked the state 39th as a place to do business in 2022, down 15 places from the previous year. CNBC gave Connecticut failing grades for its cost of living and economy, offsetting passing marks for a quality workforce, good education and an administration it rated as friendly to business.
Lamont said he would not overstate the state’s progress, noting that its pension fund still has a significant unfunded liability.
“I’m not putting up the ‘mission accomplished’ sign,” Lamont said.
Russell, who was elected in November and took office in January, said it is important to join the governor in telling Connecticut’s story.
“We wanted to convene this impressive group of investors, rating agencies, banks, bond insurers, financial experts, state officials and others, because you all play a role in how we shape the future of Connecticut,” Russell told the attendees.
In a panel discussion on the guardrails, House Speaker Matt Ritter, D-Hartford, and House Minority Leader Vincent J. Candelora, R-North Branford, said the unusual bipartisan deal that produced them in 2017 was possible only due to the inability to pass a budget until nearly Halloween.
“So to get to this great place, financial stability, we hit rock bottom,” Ritter said.
Candelora said Republicans, as a minority, had to decide whether to craft a solution or try to benefit politically from the failure of the majority party to agree on a balanced budget.
“We certainly had members in our caucus that said, ‘Let Connecticut fail, because it’s the only way for Republicans to get back in the majority,” Candelora said.
In 2017, the Senate was evenly divided, 18-18, with the tie-breaking vote of a Democratic lieutenant governor giving Democrats nominal control. Democrats had a narrow majority in the House.
Ultimately, Republicans participated in negotiations that created the fiscal guardrails. In February, the General Assembly renewed them with unanimous votes.