Who Is To Blame For Connecticut’s Deficits?
by Hugh McQuaid | Dec 6, 2012 4:41pm
(19) Comments | Commenting has expired
Posted to: Economics, State Budget
Two years into Gov. Dannel P. Malloy’s term, is it fair for his administration to continue blaming the state’s economic woes at least in part on his Republican predecessors? “Absolutely,” a University of Connecticut economist said Thursday.
During his first year in office, Malloy closed a $3.67 billion budget deficit through a combination of an historic tax hike and labor concessions from state employees. But now the state’s ledger is back in the red by a number that seems to be growing by the week.
In defending the administration, Malloy and his senior communication adviser, Roy Occhiogrosso, frequently point to years of neglect under former Republican governors. But critics say halfway through his term, it’s time for Malloy to own up to the state’s economic situation.
Fred Carstensen, director of UConn’s Connecticut Center for Economic Analysis, said even two years in, Malloy is well within his rights to pin blame on past governors for the state’s fiscal situation. Carstensen said legislative Democrats also shoulder responsibility.
“It was a bipartisan failure,” he said.
That’s because for years, state officials haven’t been concerned with tracking the state’s own performance and economic trajectory, he said. Carstensen faulted former Gov. John Rowland’s administration with allowing mechanisms aimed at monitoring the state’s economic progress to disappear.
“Fundamentally, we stopped paying attention to our own progress,” he said.
Over the years, he said, some investments have been made. Rowland put billions into the state’s higher education system, which Carstensen said was a good thing. The problem is, the investments weren’t linked to areas where our economy was growing, he said.
Meanwhile, Carstensen said former Gov. M. Jodi Rell and the Democratic-controlled legislature spent every dime available to the state while ignoring its economic trajectory as compared to other states.
“Malloy comes in with this terrible budget situation. The Rainy Day Fund was gone. I mean, the cupboard was bare, nothing was there,” he said.
So how is Malloy doing so far? Carstensen said despite the current deficit projections, he gives the governor good grades. But he could be doing more. He said Malloy’s efforts have been plagued by an anemic national recovery from a recession that was much worse than anyone anticipated and the state’s negative momentum. He said Malloy has been in a defensive position, trying to minimize losses.
Carstensen likened changing the state’s economic trajectory to turning around a moving oil tanker.
But Malloy’s two-year budget is running a deficit, estimated most recently by the state comptroller at $415 million. Carstensen said Malloy can’t disown a budget he proposed.
“To some extent it’s subject to external phenomena, but obviously it’s his budget,” he said.
Republicans have criticized Malloy and the Democrats for raising taxes without adequately reducing spending. But despite the deficit, Carstensen defended some of that spending.
“We had a false optimism in adopting the biennium budget. The economy was much weaker than we gave it credit for,” he said.
Carstensen said Malloy has been spending money making investments that have been lacking for some time.
The state borrowed $291 million to help build the genomic research lab in a deal approved by the legislature last year with the Maine-based Jackson Laboratory. The deal is expected to create and retain 300 jobs by its 10th year of operation.
Carstensen said that deal was like “winning the lottery” and now has people in the bioscience field looking at Connecticut in a way they weren’t before. But even so, he said it may be five or six years before it has a real impact on the state’s economy.
In the meantime, Malloy and the legislature will have to find places to cut state spending, a process Carstensen said will be difficult. Cuts to services impact state residents and can further damage the economy.
Carstensen said Malloy and lawmakers should consider imposing a statewide property tax targeting people who don’t live in Connecticut. He said such a tax would offer rebates for people who live here, but he added that there are a lot of people who own property in Connecticut but live elsewhere who could be taxed.
“Why are we doing them such a big favor?” he asked.
As state officials grapple with the current shortfall, Carstensen said it’s important they keep an eye on the overall direction the state is headed, and to make the investments it needs to right the ship.
“If we don’t change that trajectory this fiscal crisis will be minor compared to what we’re facing down the pike,” he said.
He likened the state to a family struggling financially and trying to determine if it can afford to send a daughter to college.
“Down the pike we’re going to be better off if she goes to college and gets her degree,” he said.
Steve Lanza, a research associate in the University of Connecticut’s Economic Department, said he saw the current budget problem less as someone’s fault and more a result of an economic recovery that turned out to be more sluggish than people had hoped a year or two ago.
With the economy lagging, the state’s revenues are down and more people are in need and accessing state services, he said.
“Most reasonable people felt last year, basically by hook or by crook, things had been fixed,” he said.
If anyone has contributed to the problem, Lanza said it wasn’t Republicans or Democrats here in Hartford. Rather, he said it was Congressional Republicans who dug in their heels in recent years and resisted efforts to stimulate the economy. They also helped bring the country to the brink of default, he said.
But much of the problem is beyond control.
“The fact that we’re growing slowly isn’t so much that we haven’t done what we’re supposed to do here, it’s just that the U.S. recovery hasn’t seen the growth that was expected,” Lanza said.
Tags: budget, deficits, malloy, carstensen, lanza, economists, governors, Hugh McQuaid, dh
(19) Comments
posted by: state_employee | December 6, 2012 5:02pm
(Carstensen said Malloy and lawmakers should consider imposing a statewide property tax with rebates for people who live in the state. He said there are a lot of people who own property in Connecticut but live elsewhere who could be taxed…)
What does this mean…??? More taxes…???
posted by: JAM | December 6, 2012 5:27pm
Problem is that there was very little, if any, basis to assume the recovery that was needed to balance his budget.
Betting on hope rather than assuming a worst case is always problematic, and usually will come to kick you in the rear end.
posted by: UConnHoop | December 6, 2012 6:38pm
Two opinions offered on CT’s economy by two “economists” working for the state. How can anyone take these two guys seriously? State & federal governments are spending themselves into oblivion and both of these guys advocate for more spending. Give me a break.
posted by: justsayin | December 6, 2012 8:54pm
These are the guys teaching the kids a UCONN? Two budget cut opportunities front and center. JAM I agree hope is not a strategy. Any reasonable person knew HIS budget was doomed because it was based on fairy dust and false hope. Put your big boy pants on Dan and own up to it, then fix it.
posted by: Fisherman | December 6, 2012 9:48pm
“He (Carstensen) likened the state to a family struggling financially and trying to determine if it can afford to send a daughter to college”.
Really?
Malloy, Toni Harp and Eileen Dailey don’t like comparing the state budget to a household budget.
That’s why we’re where we are folks… not like a family budget, huh???
posted by: Noteworthy | December 6, 2012 10:21pm
It must be nice to live in fairyland. Fred Carstensen is the same person who advocated and advised Malloy to levy nearly $3 billion in new taxes across the 2 budget years. He said it would be good for the state. Are we surprised he now gives Malloy good grades? Jackson Labs is the lottery??? haha what a crock. Nobody else in the NE wanted Jackson Labs; nobody was willing to pay so much for so little, not even Jackson’s home state. This was not the lottery, this was lala land as is all the excuses for the deficit. And last I checked, there was nothing bi-partisan about it.
posted by: CitizenCT | December 6, 2012 10:56pm
Of course Fred has nothing bad to publically say about the governor. His pay check is dependent on him. Let’s hear from an economist with no strings attached. I think you’ll find Malloy’s policies have done little to fix the state’s problems and his excessive borrowing and spending have made things worse. Fred, why does Mass have such a lower unemployment rate than CT?
posted by: jmontysko | December 7, 2012 1:40am
Fred
How many parties are you invited to at the Malloy
residence?
posted by: ALD | December 7, 2012 9:31am
I would totally agree to place blame for this latest budget mess on those who proceeded Malloy and his crew had Malloy not immediately taken all the steps he did to fix it all as soon as he took office.
Didn’t he tell us that was what the record tax increase was all about? Wasn’t that the reason for all the “shared sacrifice”? Wasn’t that the reason we would going to get GAAP accounting so the budget gimmicks would stop?
With all due respect to Steve Lanza, the problem is far less in Washington than it is in Hartford. Maybe Steve should check out what savings we got from that State Worker suggestion box for starters. Or maybe he thinks those nasty Republicans in Washington stole the box if he can’t find any.
posted by: lkulmann | December 7, 2012 10:49am
It’s my fault and I take the blame. Oh, and I spent all the money. I’m sorry. So I promise NEVER to be so careless ever again and let’s work on being careful and responsible. Turn the page. Start fresh. Stop bringing up the past wrongs and throwing them in my face. Let’s move forward, shall we?
Is there a degree in chronic bitching? Seems there is in CT…BS in CB?
posted by: Matt W. | December 7, 2012 10:53am
In a related story, CitiBank tried to explain to its creditors that their current problems are really Sandy Weil’s fault. Apparently their creditors are not as gullible as the citizens of CT and so they laid off 11,000 people and got their spending under control. BTW Fred, I read your paper on the market for electric cars. How’s that working out?
posted by: bgenerous | December 7, 2012 11:20am
A statewide property tax for people that don’t live in CT? They already pay the towns property taxes like those that live in CT, but they likely use less state services since they do not live in CT.
posted by: joemanc | December 7, 2012 11:58am
We don’t have a revenue problem - we have a spending problem. Since 1991, we have added an income tax, casino money, a real estate conveyance tax, and higher fuel taxes(I may be missing some) and we still can’t balance a budget.
“The fact that we’re growing slowly isn’t so much that we haven’t done what we’re supposed to do here, it’s just that the U.S. recovery hasn’t seen the growth that was expected,” Lanza said.
Hi Mr. Lanza - I invite you to look at Japan, who were the previous record holders for bubble bursters…how’s their economy doing after 20+ years of stimulating? Hardly growing at all…they won’t let it correct, so they get to deal with the pain of massive debt overhang. I’m amazed that your an economist and can’t see that…
posted by: JAM | December 7, 2012 12:20pm
A statewide property tax is not as easy as it sounds. There has to be a process to equalize the assessments between the towns.
If a particular town values property 10% above or below a neighboring town, it doesn’t matter since it’s all within the same taxing district. If the state, however, imposes an additional mill rate, there has to be a way to insure the assessed values are consistent.
I lived in Illinois in which many taxing districts crossed county lines (fire, scholl, etc.)Assessments were done on a county wide basis. Then the state would come in and apply an “equalization factor” to ensure that each county’s values were consistently arrived at. It was a pretty complicated and expensive process run out of Springfield.
It would require a brand new bureaucracy in Hartford.
posted by: JustTheFactsNow | December 7, 2012 12:21pm
I agree 100% Rowland and Rell should never have spent 600 mil on a busway. And they never should have continued the cushy longevity payments in the recent contract renegotiation. And they should not have STARTED the unearned income tax credit. And and and….. Malloy put all of his chips on one bet - that an improving economy would get him out of the economic mess - and he lost BIG TIME. Now he is trying to push blame, lie about deficits, and borrow money to keep the lights on. Malloy has lost his mind. Two more years of his garbage and he will be out. His legacy will be the worst governor in Connecticut history.
posted by: Bill Miller | December 7, 2012 1:42pm
The blame for our continuing fiscal woes is Gov Malloy and the Democratic legislature. They approved the busway, earned income credit, the first 5 program, and failed to make a significant deal with the state employee unions.
posted by: NickFortune | December 7, 2012 5:43pm
It’s obvious whose fault it is….It’s George Bush’s fault.
posted by: Jesterr72 | December 7, 2012 10:12pm
I just love how one coddled Liberal academic makes so many excuses for another failed Liberal (politician.) Liberals never take responsibility for anything - it’s always someone else’s fault. There’s so much BS in this piece, it is truly painful.
“We had a false optimism in adopting the biennium budget. The economy was much weaker than we gave it credit for,” (Carstensen) said. REALLY? Everybody knew that Budget was crap: fantasy revenue projections and wishful cost savings (remember Suggestion Box?). The answer is always more taxes. DON’T you morons get it??? You are killing this State. STOP YOUR DAMN SPENDING.
posted by: Jesterr72 | December 7, 2012 10:23pm
Speaking of blaming everyone else, forget trying to blame it on “the sluggish economy” and trying to say it is “beyond control”. Other States are balancing budgeted and reducing unemployment. You wanted the job - quit whining and develop a pro-growth plan. Stop the giveaways and always promising Utopia is just around the corner…Socialists have been promising that for a hundredn years - It isn’t. This state is in far worse shape than you are letting on. You know it - we know it. Get on it or get out.