A way to cure Connecticut’s ‘fiscal cancer’
The Fiscal Stability and Economic Growth Commission has issued its report. It recommends proposed net tax and toll increases, tax reform, aspirational but unspecified spending cuts, and no changes to the SEBAC agreement until 2027. Now that the report has been issued, it seems appropriate to compare it to my previously submitted recommendations.
Connecticut’s problem is fairly simple. Gov. Dan Malloy and his Democratic allies have raised taxes, increased regulation, adopted such an anti-business approach, and promised such generous retirement benefits to state workers that revenues are declining, recurring deficits are normal, and economic growth is anemic as Connecticut businesses and families flee the state. Connecticut faces large and growing structural budget deficits, mounting debt, huge unfunded retirement obligations, a deteriorating infrastructure, and an education and skills gap disparity, that traditional politicians either can not or will not address.
While Connecticut faces huge problems, they can be solved by a governor who is a proven problem solver and works with a supportive legislature that is ready to truly tackle our state’s problems. During my tenure as Comptroller General of the United States and head of the General Accounting Office, I worked with Congressional leaders and GAO staff to implement major reforms that dramatically transformed the agency and saved federal taxpayers about $380 billion. I have solved complex problems before in government and I can do it again in Connecticut. What do we need to do?
First, Connecticut businesses and individuals are overtaxed. Under my plan, some tax cuts will occur quickly in order to stop the exodus from our state. More and even bigger tax cuts can and will happen after we right-size state government, restructure state compensation/benefit programs, and reform the state’s welfare system.
Significant economic and job growth will only occur after we put the state’s finances in order. CEO’s, boards and sophisticated investors can read financial statements and understand budget debates. Connecticut’s financial statements and budget projections make it clear that our state has “fiscal cancer.” We can beat cancer but only if we recognize reality and begin to aggressively treat the root causes of the disease.
Second, Connecticut needs to strengthen its basic fiscal controls in order to get back on track and provide more effective fiscal discipline and certainty over time.
For example, the state should make it clear that borrowing can not be used to “balance” the state budget. The state spending cap should be based on “net state spending” and should include all pension and other retirement obligations. We should adopt a “No Budget: No Pay” policy for legislators in connection with the state budget. Finally, there should be serious sanctions for any diversion of “trust fund” assets (e.g., transportation trust fund) for undesignated purposes.
Third, Connecticut has lost control of its budget and faces large and growing structural deficits due, in large part, to unreasonable, unaffordable and unsustainable pension and retiree health care obligations for government employees. Connecticut must restructure such benefits in a fair manner using the sovereign powers of the state so they are competitive, affordable, sustainable and more secure. Failure to do so will result in additional pressure for increased taxes, reductions in education funding, municipal assistance, and infrastructure investment. It can also eventually result in a shredding of the state’s social safety net for those who are truly in need over time. These are all unacceptable outcomes that must be avoided.
Fourth, Connecticut has among the most, if not the most, generous welfare systems in the country. As a result, our state has become a magnet for individuals who rely on it. Connecticut’s current system is subject to significant waste and abuse, it discourages work and marriage, and it creates a cycle of multi-generational dependency. Our welfare system must be reformed to provide a sound and secure safety net for those who face temporary setbacks and those with serious long-term disabling challenges. At the same time, additional steps need to be taken to create additional job opportunities, enhance training programs and adopt reforms in order to provide a path forward for those who have been stuck in a cycle of poverty.
Last, you can’t have a great state if several of its largest cities are headed for bankruptcy and have non-competitive property taxes. We must provide mechanisms to restructure municipal finances outside of bankruptcy and promote economic development in our cities. Businesses, millennials and retirees want vibrant cities. They don’t have to be big but they must be safe, financially sound and have interesting things to do.
It’s not too late to save our ship of state, but it will take a professional problem solver with a proven track record of success to do it. Working together, we will succeed.
David M. Walker of Bridgeport is a Republican candidate for governor and former U.S. Comptroller General.
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