Fasano Takes Aim At Debt Reduction
As of last week, Sen. Leonard Fasano, a Republican from North Haven, was the only Senator to pre-file legislation for the upcoming session.
The two bills Fasano will propose when the session starts Feb. 5 would seek to reduce capital indebtedness and ask that any net earnings or interest on bonds be used to make additional payments on principal and interest on outstanding capital debt.
On Friday, he said those ideas are not out of step with what the House Republican caucus proposed doing with any surplus funds.
Last week, the House Republican caucus proposed using $247 million in excess revenue to speed up restoration of the tax exemptions on clothing, footwear, and over-the-counter drugs. They also proposing eliminating the special assessment businesses pay to the unemployment fund.
There were no Republican Senators at the press conference, but Fasano said that doesn’t mean he doesn’t support their proposal.
He said Senate Republicans received information about the press conference on short notice and none of them had time to rearrange their schedules.
Fasano is next in line to succeed Sen. Minority Leader John McKinney, who is running for governor instead of seeking re-election to his Senate seat.
“We need to look for ways to cut taxes and reduce spending to address our out-year deficits,” McKinney said in a statement last week in support of the House Republican’s proposal. ”I support these proposed tax cuts which provide needed help to Connecticut taxpayers, especially seniors, small businesses, and the middle class.”
Fasano said the message he’s sending by proposing the two bills is consistent with what House Republicans said last week.
“We are saddling the next generation with a lot of debt,” Fasano said.
He said he wants to end the practice of borrowing to give more money to towns. He said that has driven up the state’s debt over the past year and it has to stop.
Since Democratic Gov. Dannel P. Malloy has taken office, the state’s capital debt has increased from $19.8 billion to about $20.9 billion.
“You can’t say look at how much we’re saving by putting more on a credit card,” Fasano said Friday. It’s “foolish to think of that as excess revenue.”
However, the Malloy administration also likes to point out that when it comes to long-term liabilities, they also reduced the state’s obligation for post-retirement benefits of state employees by about $15 billion. The state doesn’t actually start making the contribution to lower that unfunded liability until 2017.
Republicans have argued that the Malloy administration shouldn’t be able to count the additional savings until they’re actually realized in the budget.
The administration used a report it created earlier this month to tout an $11.6 billion reduction in long-term debt. All of those savings come from the restructuring of retiree health benefits as part of the labor agreement the governor reached with state employee unions back in 2011 and none of the debt reduction is tied to the state’s capital indebtedness.
“Interest rates are expected to go up and when they do the debt is tied to that,” Fasano said.
House Speaker Brendan Sharkey said last week that he would like to see surplus funds used to pay down the 2009 Economic Recovery Notes and to beef up the state’s Rainy Day Fund, which was depleted during former Gov. M. Jodi Rell’s administration.
“My priority would be debt reduction,” Sharkey said.
He said the 2009 Economic Recovery Notes that were used to close the deficit before Malloy took office were “done on an interim basis when we were in the depths of a recession.” He said that thanks to the current administration, the state is now emerging from that economic downturn and the first priority should be to pay off those debts.
The estimated $940 million in excess funds this year, including about $271 million in the Rainy Day Fund, $506 million in budget surplus funds, and $160 million in increased revenues.
There’s debate about how much of that is really “excess” because nonpartisan budget analysts have projected that it all but disappears by 2016 if the state continues to spend at its current rate. In November, the Office of Fiscal Analysis estimated deficits of $1.1 billion to $1.4 billion over the next three years starting in 2016.