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What Can Happen if CT Doesn’t Have a Budget for a Long Time? Look at Illinois.

June 30, 2017 By Staff
What Can Happen if CT Doesn’t Have a Budget for a Long Time? Look at Illinois.

As Connecticut plans to operate government without a budget, starting on Saturday, Illinois faces "junk" bond status as it enters a third year without a budget.

Gov. Dan Malloy (D-Conn.) blasted the state legislature on Thursday as yet another day passed without a state budget for the next two fiscal years. Malloy has floated a “mini-budget” for the next few months that would raise revenue but also spare some parts of government from large cuts.

The CT Mirror noted that Malloy saved “his greatest scorn for the House leadership.” House Democrats, the Mirror reported, want to vote on a two-year budget on July 18 that raises sales taxes, instead of voting on Malloy’s mini-budget.

What happens if Connecticut runs government without a budget? The short- and long-term outlooks are troubling.

SHORT-TERM

Reclaim Connecticut reported on some of the short-term consequences for operating without a budget earlier this week:

Every day without a two-year budget, though, can hurt the state. The Hartford Courant reported as much on Wednesday, writing that the lack of a plan could lead to “across-the-board cuts” and that the lack of “increased taxes” from the new budget could push the deficit for fiscal year (FY) 2018 even higher.

Either way, Wall Street rating agencies will not look favorably on the impasse. The lack of a deal may also make voters, who go to the polls in about 18 months, more likely to vote for a change.

Gov. Dan Malloy (D-Conn.) blasted the state legislature on Thursday as yet another day passed without a state budget for the next two fiscal years. Malloy has floated a “mini-budget” for the next few months that would raise revenue but also spare some parts of government from large cuts.

The CT Mirror noted that Malloy saved “his greatest scorn for the House leadership.” House Democrats, the Mirror reported, want to vote on a two-year budget on July 18 that raises sales taxes, instead of voting on Malloy’s mini-budget.

What happens if Connecticut runs government without a budget? The short- and long-term outlooks are troubling.

SHORT-TERM

Reclaim Connecticut reported on some of the short-term consequences for operating without a budget earlier this week:

Every day without a two-year budget, though, can hurt the state. The Hartford Courant reported as much on Wednesday, writing that the lack of a plan could lead to “across-the-board cuts” and that the lack of “increased taxes” from the new budget could push the deficit for fiscal year (FY) 2018 even higher.

Either way, Wall Street rating agencies will not look favorably on the impasse. The lack of a deal may also make voters, who go to the polls in about 18 months, more likely to vote for a change.

LONG-TERM

On the latter point, look no further than Illinois for the consequences of operating a state government without a budget for the long term. Bloomberg reported on Friday:

Illinois is on the verge of its third straight fiscal year without a budget as Republican Governor Bruce Rauner and Democratic lawmakers struggle to agree on how to rein in the government’s chronic deficits, edging it closer toward becoming the first junk-rated U.S. state.

The gridlocked leaders have until midnight to reach an agreement to end an unprecedented impasse that’s left Illinois without a full-year budget since mid-2015. Without a deal around July 1, S&P Global Ratings has warned that the nation’s fifth-most-populous state will likely get downgraded again, losing its investment-grade status.

Connecticut is slightly ahead of Illinois in S&P’s bond ratings, at “A.” Illinois is at “BBB,” while Connecticut and New Jersey are the only states with “A” status. Every other state that S&P rates is at “AA” or “AAA” status.