Stepping Connecticut back from the financial abyss

Connecticut residents have grown weary of budgets that both cut services and increase taxes — understandably so. It’s time to bring the oppressive cycle of tax increases, followed by revenue shortfalls, service cuts, and yet more tax increases to an end.

But it can only happen if there are structural changes to the way our state does business. Connecticut’s leaders — at both the state and local levels — must work together to prune and reshape a legal and regulatory thicket that is choking Connecticut’s growth, and putting the cost of state government on a steep upward trajectory.

If we are to follow the example of states like Michigan and Indiana, which once struggled but now are thriving, then nothing is more important than labor reform.

The Republican budget, which passed both chambers with bipartisan support last month only to be vetoed by Gov. Dannel Malloy, included many significant structural reforms.

Although it appears that not all of those changes have been retained in the bipartisan budget, from what we know now (pending release of the full budget, which will hopefully happen soon), having reformers at the table ensured that many good and important changes were included.

For example, one category of reforms central to improving Connecticut’s economic climate — contained in the bipartisan budget — includes offering local leaders greater control over their own budgets. This feature is more essential than ever, given that all budget proposals have imposed cuts on municipalities.

What’s more, it’s a simple matter of fairness. Gov. Malloy has criticized municipal officials in recent months, saying that they should reduce spending and find ways to get by without more – or, for some, any – help from the state. Although spending reductions at the state and local level are certainly necessary, there’s no way Connecticut’s legislators or municipal leaders can simply cut their way to a healthy, thriving state.

When the governor faults municipalities for failing to have cut their budgets deeply enough, perhaps he’s forgotten that much local spending is, in fact, <i>required</i> by the state government’s rules.

State mandates often force local leaders to spend more than they actually want to. By tying the hands of municipal officials, these mandates end up forcing towns to raise their property taxes, which hurts local taxpayers – especially those on fixed incomes.

Among the most onerous and expensive of the state’s mandates are binding arbitration laws. They govern how contracts between municipalities and local government unions are negotiated.

When town leaders sit down at the negotiating table with government unions, state laws stack the deck in the unions’ favor at virtually every step of the process. That’s especially true if a contract goes to binding arbitration.

By state law, just one unelected, supposedly “neutral” arbitrator gets the final word on vital local issues like how much to increase pay, and what the work rules will be. This means that arbitrators indirectly control how much Connecticut’s residents pay in property taxes.

After an arbitrator has made a final decision, elected local officials — and by extension, voters — have no recourse whatsoever.

It isn’t this way in other states – not even in government-union-friendly states like Rhode Island and Massachusetts. (In Massachusetts, for example, employers are bound by an arbitrator only if they explicitly agree in advance of arbitration.)

And this isn’t the way it should be here in Connecticut, either. Elected leaders should be bound only by the will of the voters whom they represent — not by unelected arbitrators who are accountable to no one.

The Republican budget that passed both chambers of the legislature last month reformed Connecticut’s broken arbitration process. Amendments to state law in the budget would have given municipalities the ability to overturn an arbitrator’s decision by a supermajority vote of a municipal board.

Along with binding arbitration reform, the Republican budget also included a strong spending cap (25 years after more than 80 percent of voters approved a constitutional spending cap that’s never been enacted); a debt cap; collective bargaining reform; pension reform; and prevailing wage reform.

Without a majority in either legislative chamber — and with a determined adversary in the governor’s mansion — it is to the reformers’ credit that they were able to include so many of these indispensable structural changes in the bipartisan budget. Although much more sweeping reform will ultimately be necessary to restore Connecticut’s prosperity, this was an encouraging first step — virtually unimaginable just last January — and one that lays a solid foundation for further progress.

Tackling any one of these reforms — much less all of them — is politically risky; the lawmakers who drafted and supported the Republican budget, and then fought for those reforms in the budget compromise, deserve our admiration and our thanks.

Plunging Connecticut into fiscal crisis was not the work of a single year, and extricating it will not be a one-year process, either. It will take time to right the ship. But at least we are starting now by addressing the root causes of Connecticut’s woes, and legislators have not succumbed, once more, to the government unions’ demands for yet another substantial tax increase.

The reforms in the bipartisan budget are a start, and they are long past due. Without them — and more, hopefully, to come — Connecticut will remain locked in the same old endless cycle of budget deficits followed by tax hikes and service cuts, staggering ever closer to the brink of the fiscal abyss.

Carol Liebau is President of the Yankee Institute for Public Policy.