A Head Scratcher of a State Budget

by Michele Jacklin

About the best you can say about the two-year, $43 billion state budget adopted this week by the General Assembly is that it was approved on time and is mostly balanced, with the exception of some hoped-for savings from state employees that may or may not materialize. 

Given the legislature’s recent history of going into overtime to adopt budgets, it’s an achievement to have passed one by Wednesday’s midnight witching hour. What’s more, the tax-and-spending plan has the blessing of Gov. Ned Lamont, another bragging right.

Yet there’s an awful lot in this budget that leaves observers incredulous. For a plan that started out with such promise – e.g., bold ideas for regionalism, pension reform and tax restructuring – the budget is largely the same old, same old. With the audacious initiatives having vanished, this budget is going to land on Lamont’s desk with a dispiriting thud. And at 567 pages, it will be a very loud and dispiriting thud.

The two top priorities of The Tax Policy Collaborative are: a rebalancing of the state’s tax structure to make it fairer and more progressive and a lessening of the property tax burden that has contributed to an exodus of residents and businesses, as well as economic stagnation, especially in those municipalities with high tax burdens.

On both those fronts, this budget fails miserably. A coalition of House Democrats pushed proposals to raise the income tax rate on millionaires by an ever-so-small amount and another to tax investment income by an additional 2 percentage points. Another bill that would have begun to reduce the gross disparities between towns with respect to their fiscal capacities was drafted and approved by a committee. Then it died.

Alas, in the end, the progressive caucus achieved very little in terms of budget reforms, having locked horns with a millionaire governor from Greenwich who had drawn a line in the sand on raising taxes on the wealthy. Lamont refused to give ground and the progressives retreated without so much as a whimper.

Hence, the single progressive item in the budget is a rather silly mansion tax of 2.25 percent on homes that sell for $2.5 million and up. But the only people who will have to pay this exit fee are those fleeing Connecticut. It’s a sort of good riddance, kick-in-the pants tax on folks as they head out the door. And because of what appears to be a drafting error, those who pay the tax and remain in the state will apparently get a credit on their income tax greater than the amount of the additional mansion tax they will pay.

The budget does extend the 6.35 percent sales tax to some items, such as prepared foods and parking. But does that move the needle in terms of progressivity? Nah. Does it make the tax structure simpler or fairer? Nah. Those piddling tax hikes merely raise some additional money to help balance the budget. One could even argue that applying the sales tax to items such as prepared foods makes Connecticut’s tax structure more inscrutable. Is that roasted chicken that you buy at your local supermarket a prepared food? We’ll soon find out.

As for a reduction in property taxes, nada. There’s a slight increase in state aid for education but it’s not going to have a significant impact.

Regionalism? A blown opportunity to find real savings by consolidating services. Lawmakers became downright timid in the face of criticism from suburbanites who don’t want anyone  messing around with their sacrosanct schools. Thus, Connecticut will continue to host scores of school districts with ever-shrinking enrollments and ever-rising costs.

Unless there is some movement at some point in the direction of regionalism, cities and towns will forever be burdened with foolish (but avoidable) inefficiencies and stubbornly high property taxes.

On the spending side of the ledger, the budget is stuffed full of the type of nonsensical expenditures that should have been jettisoned long ago.

For example, there is oodles of pork barrel spending, presumably targeted at districts where Democrats would like to hold onto their seats come the 2020 election. But really, does Rep. Minnie Gonzalez of Hartford – whose grip on her seat is unremitting – need a $30,000 grant for the Youth Baseball League named after her? As reported by The Hartford Courant, Gonzalez agreed to have the league named after her only if her husband became the league treasurer. Make of that what you will.

Given the state’s precarious economic situation, the 2019 legislative session was ripe for reform. Time’s a-wasting. According to The Hartford Business Journal, the latest biannual “State of the States” credit report by Hartford-based investment manager Conning ranked Connecticut No. 46 in the U.S. for credit quality. The state scored poorly in debt per capita, gross domestic product, job growth, personal income growth and population growth.

Lamont, an outsider who is not wedded to the past, and a bevy of fresh-faced lawmakers came charging into Hartford in January ready to change the way state government financed its operations. But they didn’t. Not even a little.

It’s a head scratcher.