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OP-ED | Is A Budget Plan Being Hatched?

by Heath W. Fahle | Jan 7, 2011 2:51pm
(6) Comments | Commenting has expired
Posted to: Opinion, State Budget

Like Captain Edward Smith boarding his ship on the morning of April 10, 1910, Dannel Malloy took the oath of office to become Connecticut’s 88th Governor amid the Inaugural pomp and circumstance as a man who will make history, one way or another.  Unlike Captain Smith’s voyage aboard the Titanic though, most people know about the icebergs laying in wait for Governor Malloy.  The state’s $3.4 billion budget deficit may well approach $5 billion once Mr. Malloy brings his oft-discussed and much needed Generally Accepted Accounting Principles (GAAP) reforms to the state government’s ledger.

But while recognition of the problem is near-universal, there is a remarkable dearth of plans for actually addressing it.  Many observers seem to have simply circled the date of Gov. Malloy’s budget address, February 16, 2011, on their calendars and begun to wait.

Perhaps recognizing that politics abhors a vacuum, former Secretary of the Office of Policy and Management Bill Cibes hasn’t been waiting to see what Mr. Malloy will do.  He has been circulating documents that describe the state deficit as a problem of lost revenue rather than spending increases while spelling out a list of $5.3 billion in tax credits and deductions that could be repealed or modified. His data also includes a list of 39 services that aren’t currently subject to the sales tax but are in other states, such as dental services, veterinary services, and shoe repair, and could be taxed in Connecticut.

Cibes, who is widely credited and/or vilified as the midwife of Connecticut’s income tax, justifies his support for a new round of tax increases by noting that the tax burden as a share of personal income is the fourth lowest of the 50 states, that business taxes as a share of gross state product are fifth lowest in the nation and business taxes as a percentage of total taxes are the second lowest in the US.

This view, of course, seems incongruous with much of the Connecticut experience over the last several years.  The Chief Financial Officer of Connecticut’s largest private employer recently described their views toward the state business environment by commenting, “Anywhere but Connecticut.” The combined state and local tax burden is third highest in the nation at 11.1 percent of income,  the business climate was recently ranked 47th nationally,  and Connecticut’s Economic Performance Rank as calculated by Dr. Arthur Laffer put it at 45th among the states

Nonetheless, the Office of Policy and Management’s Fiscal Accountability Report for Fiscal Years 2011-2014 offers some further justification for using the sales tax as a revenue generator. The report notes that though the personal income tax (PIT) is the largest source of state revenue, it is plagued by 30 percent more volatility than the stock market. The sales tax, however, is half as volatile as the Dow Jones Industrial Average and that, “this volatility makes it difficult to consistently fund ongoing programs and can result in increased program funding in good times beyond sustainable levels and a propensity to ratchet up tax rates when a recession occurs.”

In the absence of other ideas, the Cibes plan seems to have struck a chord among Connecticut’s newly-empowered bosses.  In his speech to the State Senate after being formally elected as Senate President Pro Tempore and in subsequent media interviews, Sen. Don Williams sounded similar themes as he directed very specific barbs at “tax expenditures”.  The rhetorical and practical budget solution for the Democratic leadership seems to falling into place but it leads one to wonder: do tax hikes go down easier with taxpayers if one calls them spending cuts?

Heath W. Fahle is the Policy Director at the Yankee Institute for Public Policy, a free market, limited government think tank based on the campus of Trinity College in Hartford.  You can contact him via www.heathwfahle.com for more information

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(6) Comments

posted by: GoatBoyPHD | January 9, 2011  8:06am

GoatBoyPHD

John Rowland’s 2002 budget was for $13 Billion.

Here we are with a budget of $19.5 bil or 50% higher in 2010 during the worst recession since the Great Depression

What is the problem? Is it the taxpayers for not earning enough? Is it CT business for not earning enough?

The problem seems obvious.

The common rate of inflation would suggest $15.8 Billion as a 2011 budget based on the 2002 budget as in index.

In other words if Budget Cuts of $3.7 bil were applied (the current deficit) to the proposed $19.5 bil budget we would be back to normalcy—a $15.8 bil budget.

Even at that inflation adjusted 2002 rate of spending and taxation CT was not attractive to business. But it’s a start. Return to the 2002 budget and set it for inflation.

Don’t con us that the goods and services from the state are so much better now that it can’t be done. Or that there isn’t fat in agencies to deliver their goods and services at that funding level. That’s the test of good management. Improving outcomes with less money. Continuous improvement.

Increasing taxes is simple pandering.

posted by: unionleo | January 9, 2011  11:52am

Curious defense here. The Yankee institute has a stellar reputation for making things up.  Of course they need to defend themselves from reliable data, factual commentary and an honest and sincere discussion about how we can fix the problems to help everyone, not just all the Wall Street fat-cat donors who fund Yankee’s marvelous fiction writers.

posted by: City Hall Watch | January 9, 2011  2:58pm

Is it a surprise that Don Williams embraces only tax hikes? lol. To borrow from Geico, does a woodchuck chuck wood? You can take it to the bank: The Democrats in power will embrace new found taxes and enchancements to old ones as the primary driver to the deficit solution. There may be some small cuts but they will be symbolic. Don’t count on a smaller payroll, consolidated agencies or any significant reduction in the bloated wasteland of state government. These people only know how to spend money on monogrammed chairs, private cars squiring state employees and top officials around the state and blackberry’s and cell phones for all. Lots of holidays and poor outcomes from education to social services. It’s hard to name a single state office that operates effectively let alone efficiently. Hells bells, event the state senate is a study in corruption, ethics lapses and absolutely no effort to control it. Just like Dan became Danell, expect the BS surrounding “shared sacrifice” to mean nothing.

posted by: hawkeye | January 9, 2011  7:27pm

Gov. Dannel Malloy and our Deficit Spending Connecticut Democratic General Assembly are already a team, that will assuredly give us higher taxation, “under the guise of caring representation!”

posted by: GoatBoyPHD | January 10, 2011  8:54am

GoatBoyPHD

Nice editorial in the Courant today Heath.

SEBAC and The Department of Information Technology (DOIT) scored a huge victory when they were able to frighten Rowland and Rock Regen from outsourcing technology.  I opposed it at the time as I thought it was short-sighted and anti-union. A few contracts with the State of CT since convinced me otherwise.

Here’s the press release celebrating that loss for the state taxpayers.

http://tinyurl.com/3xrm5jj

My last contract with a state agency to convert a suite of desktop Access applications to web applications ran out of funds after 18 months. After 18 months nothing was done. Nothing!

The Department of Information Technology (DOIT) AKA as (Can’t DO IT, Can’t DO Anything) wasn’t able to provide documentation on the Novell LDAP User system and how they were going to manage group permissions and what interfaces we would be getting in order to define Administrators, Guests, Read and Write permissions,etc. Truly amazing. They wanted to micromanage and then failed to deliver. It was their test project as a web hosting service. Normally 3rd party companies handle this stuff and all the info is available on Day 1. 18 months and they couldn’t tell us what the interfaces would be for password management.

18 Months! DOIT was going to ‘wrap’ the Novell API calls rendering the Novell documentation useless. Didn’t get done before my contract expired (with funding depleted and nothing done).

The agency then switched directions back to an updated desktop program rather than web.  As it turns out after some personnel moves the agency really didn’t want a web presence.


Like any proposal that would change work habits, once the sponsor for a web based solution left (was forced out for confrontational visionary thinking) the old guard started dragging their feet and dragging out requirement gathering for over a year. Between the lack of internal commitment to a web solution, a committed resistance to change, and DOIT’s Jabberwocky meetings of “Well get back to You on the passwords and hosting and standards and deployment thing” it was a fine tuned debacle.

The ROI studies were run: there was money to be saved in the system by going to the web and empowering the end users and harnessing their time instead of SEBAC employee time to maintain their records. Didn’t matter.  It was another SEBAC triumph over taxpayers and common sense.

One thing Legislator Richard Roy found out correctly: he had to legislate that DEP will become an online web-based agency. Literally if it’s not written into legislation and the legislature isn’t there to micromanage the agencies this stuff will not get done. If it isn’t in legislation it’s optional—meaning it detracts from their self-perceived mission. I’d call it dysfunctional but you know the old quip—that’s so unfair to the dysfunctional.

Believe me—you can’t hammer them enough. This is where Democrats and Republicans should be able to get together. Regardless of the budget there’s no reason to settle for bad business process. Worse still, having SEBAC oversee improving business process. This is an area where citizen committees of retired business people could be helpful, etc. working with the legislature to write into laws everything necessary—including a yearly org chart if necessary. The agencies can’t manage themselves. The politicla appointees run smack into the old biys network of footdragging. And it’s perfected. Half the people have worked together for 15 years or more and know the game with snowballing the appointees.
.

posted by: Specter | January 10, 2011  10:21am

GoatBoyPHD - You said, “This is an area where citizen committees of retired business people could be helpful, etc. working with the legislature to write into laws everything necessary—including a yearly org chart if necessary. The agencies can’t manage themselves.”

I agree wholeheartedly. Unfortunately we now live in a social environment where two things (well - more than two, but these fit with this meme) happen: 1) First people ask, “What’s in it for me?” There are so many people who are so wrapped up in their own lives that getting involved in anything outside of that is anathema. 2) There are too many people today that make up their minds on who to vote for based on 30 second sound bites on TV. Very few actually get involved enough to study the issues and positions of each politician.