Does “No” Mean Yes?

Governor Malloy has told the Appropriations and Finance, Revenue & Bonding committees through his Office of Policy and Management Secretary Ben Barnes that he will not resort to tax increases to backfill what Mr. Malloy calls a $365 million “shortfall” in his budget.

Mr. Malloy has been less assertive concerning “a deficit of as much as $1.2 billion projected for the coming fiscal year -- a shortfall of 6 percent-- saying only that he has ‘no intention of raising taxes,’" according to a story in CTMirror.

During his first budget, Mr. Malloy settled a budget deficit through massive broad based tax increases and anticipated “spending cuts” that fell short of the “shared sacrifice” from state workers that had been a hallmark of his gubernatorial campaign, which hoisted into the gubernatorial office the first Democratic governor since William O’Neill turned over the reins of government to Lowell Weicker, who settled his inherited deficit through the imposition of a state income tax, the second largest tax increase in state history. The Malloy tax increase is larger.

And here we are again – in deficit low dive.

The notion that Connecticut does not have a spending problem but rather a revenue problem that may always be solved through the expedient of tax increases seems now somehow quaint. That notion was, during the past four decades, much on the lips of politicians who did not wish unnecessarily to disturb their tax consuming constituencies, as well as lazy and thoughtless political commentators across the state who thought the good times of budget surpluses would never end, at least not here in Connecticut, in pre-income tax days thought to be one of the richest and most fiscally sound states in the union.

No more.

On a best (1) to worst (54) scale issued by Moody’s Analytics, Connecticut is near bottom (45) in economic growth. Connecticut’s economy has been flat ever since Mr. Weicker sought to solve the state’s revenue problem through a new income tax. The consequent revenue increases during the following decades opened a Pandora’s Box of spending.

It has now become settled opinion that Connecticut has a spending problem aggravated by an unwillingness on the part of successive governors and the Democratic dominated General Assembly to recognize the primary reason for the state’s woes –profligate spending -- even after all the red flags have gone up: Connecticut is number one in taxes and number one in pension obligations; the state has lost population from outmigration part of which has been caused by workers seeking employment opportunities in more business friendly states; young people armed with very expensive college educations paid by state taxpayers are taking their diplomas to greener economic pastures. And all this is simply the tip of a spending spree that has frozen the state’s forward movement.

It is against this depressing backdrop that Mr. Malloy has declared he “has no intention” of addressing the state’s current $365 million “shortfall” by increasing taxes, and it would be a refreshing sign of a return to fiscal sanity to suppose that one governor out of the last three has finally got the message.

State law permits the governor to address a shortfall in the budget by exercising his constitutionally limited rescission authority. Mr. Malloy already has announced that he will use his authority to cut between $150 and $160 million from the $365 million “shortfall,” leaving the remaining approximate $215 million balance to be addressed by the Democratic controlled General Assembly. The governor cannot rescission his way out of the deficit. Assuming Mr. Malloy is able to reduce the deficit as he wishes, the projected deficit the General Assembly must address for the coming fiscal year is approximately $1.2 billion plus $215 million – and growing.

The role that will be played by the General Assembly in liquidating the growing deficit introduces an uncertainty principle into Mr. Malloy’s repeated avowal that HE has no intention of increasing taxes. The Democratic dominated General Assembly may be of a different mind. Outgoing Speaker of the House Chris Donovan has in the past supported legislation that would increase state revenues by squeezing Gold Coast financial managers, and his successor, Brendan Sharkey, has not sworn off increasing tax rates progressively on the state’s entrepreneurial growth engines.

One supposes neither Mr. Malloy nor Mr. Barnes would be anxious to answer the question: Will the governor, who has pledged not to increase taxes, veto tax increase measures passed by his fellow Democrats in the legislature.

Time will tell. And time for the state’s recovery is running out.