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ANALYSIS: The Good, the Bad, and the Questionable of Commission’s 10 Fiscal Recommendations

March 2, 2018 By Staff
ANALYSIS: The Good, the Bad, and the Questionable of Commission’s 10 Fiscal Recommendations

The Connecticut Commission on Fiscal Stability and Economic Growth issued 10 recommendations on Thursday to get the state on the path to solvency.

The Connecticut Commission on Fiscal Stability and Economic Growth issued 10 recommendations on Thursday – covering spending, taxes, regulations, and initiatives – to get the state on the path to solvency.

Gov. Dan Malloy (D-Conn.) was cautious in his response, but so were Senate Republican President Pro Tempore Len Fasano (R-North Haven) and House Republican Leader Themis Klarides (R-Derby).

It seems Democrats and Republicans are giving the proposal time to marinate. In the meantime, here’s Reclaim Connecticut’s take on the good, the bad, and the questionable of the commission’s report, at first glance.

THE GOOD

  • #3: “Create a Joint Budget Committee of the legislature with the power to set limits on revenues and expenses.”
  • #4: “Have the legislature assume the responsibility to define state employee fringe benefits by removing them from collective bargaining for new contracts.”
  • #5: “Amend binding arbitration laws to permit award of compromise outcomes.”
  • #6: “Develop and implement a plan to cut $1 billion out of annual operating expenses.”
  • #7: “Reform the Teachers’ Retirement System to lower costs and to make it sustainable by paying down unfunded liabilities.”

Half of the commission’s recommendations strike at two of the central, long-term problems for the state: 1) liabilities from state employee pensions and benefits, and 2) runaway state spending. Giving the reins of fringe benefits to the legislature, for example, will not remove partisan politics from the equation but will make it more likely there’s some restraint on future contracts with state workers.

THE BAD

  • #2: “Raise the gas tax to fund transportation projects and produce a plan for eventual implementation of electronic tolls.”

Reclaim Connecticut readers have made clear they’re opposed to tolls, and to Malloy’s proposal to raise gas taxes. While Malloy may support this part of the plan, there’s little appetite for hundreds of millions (or even billions) of dollars in new taxes.

THE QUESTIONABLE

  • #1: “Enact a revenue neutral rebalancing of state taxes (which becomes revenue positive when coupled with economic growth) that reduces income taxes in every bracket, selectively raises taxes on business, raises the sales tax rate by less than 1%, cuts exemptions and exclusions from all taxes by 14%, and eliminates the dwindling estate and gift taxes.”
  • #8: “Reinvest in transportation and cities, and build a major new STEM campus in one city in partnership with a major research university.”
  • #9: “Undertake a series of growth initiatives, led by the executive branch, with the funding and support from the legislature to (1) develop and retain the workforce Connecticut needs, (2) support the growth of Connecticut’s highest-potential economic sectors and (3) transform the business environment for entrepreneurship and innovation.”
  • #10: “Diversify municipal revenue streams beyond the regressive property tax and stimulate regional service delivery.”

Regarding items 8-10, some taxpayers will question whether new spending is the wisest way to use their tax dollars, with current, multibillion-dollar deficits. Yes, the commission proposal works to balancing the budget, but could it balance the budget quicker without the above proposals?

The tax “rebalancing” is the headliner, and perhaps invites the most questions. Who does reducing income taxes help? Who does raising business and sales taxes hurt?

The fiscal commission made an effort to tackle the state’s massive budget question, but, for now, there may be more questions than answers.