Malloy Budget Passes Senate

Alleging that the budget that passed through the Connecticut state senate would lead to job creation, the ultimate goal of Democrats in the General Assembly, Gov. Dannel Malloy, seemingly pleased that his budget sailed through the senate without serious revision, thanked Senate President Don Williams, Majority Leader Marty Looney, Appropriations Chairman Toni Harp and Finance Chairman Eileen Daily in particular. “They took the budget I proposed, they made it better, and they passed it,” said Mr. Malloy in the following press release:

“The Senators who voted for this budget early this morning should be commended for making the tough decisions necessary to begin the process of getting Connecticut’s fiscal house in order. That was a tough vote to make, but it was the right vote to make. It was a vote for an honest budget, one that’s balanced with no gimmicks, and one that will stabilize the state’s finances and lead to our ultimate goal: job creation. I’d like to thank Senate President Don Williams, Majority Leader Marty Looney, Appropriations Chairman Toni Harp and Finance Chairman Eileen Daily in particular. They took the budget I proposed, they made it better, and they passed it.”

The budget, which includes the largest tax increase in state history, passed the senate by a narrow margin of 19 to 17, three Democrats -- senators Joan Hartley of Waterbury, Gayle Slossberg of Milford, and Edward Meyer of Guilford -- voting against the measure. The marathon debate on the budget ended at 3:00 in the morning. The $40.2 billion two year budget increases spending by 2.14 percent in the first year and 2.32 percent in the second year.

Republicans, who had no hand in shaping the budget hammered out by Democrats behind closed doors, said the tax increases were too high and would produce a surplus of $1 billion in the span of two years. Democrats answered that the surplus is needed to pay off debt and replenish the “rainy day fund" depleted by former Governor Jodi Rell and the Democrats, who have habitually voted for a tax increases they knew were too high. Ever since the income tax had been written into law, Connecticut’s Democratic dominated legislature and its three previous governors have used frequent billion dollar surpluses to boost an ever increasing level of spending.

One need only imagine a drunken sailor in a bar staring with steely determination at a pretty woman to have perfect picture of the effect surpluses generally have on high spenders in and outside the state legislature.

Mr. Malloy was roundly denounced by Republican leaders for having cut them out of the budget decision making process.

Noting that Mr. Malloy had dangled before them a promise of bi-partisan cooperation on the budget, Republican leader Larry Cafero concluded that the governor was “unwilling to compromise, unwilling to listen, headstrong, and not willing to be flexible. It's his way or the highway.”

Sen. Steward McKinney asked pointedly during debate on the budget, “How can you be open for business when you have a 100 percent increase on the corporate surcharge? You cannot preach and talk and scream and say we're open for business and increase the corporate surcharge. At some point, the talk is hollow and meaningless.''

Mr. Malloy’s aversion to dealing with minority Republicans in the General Assembly is reminiscent of the strategy employed by President Barack Obama in pushing through a veto proof congress contested measures that much of the country disapproved of. In a subsequent election, many of the congresspersons who hanged together with Mr. Obama later were hanged separately in the mid-term elections.

Prior to the passage of his budget in the senate, Mr. Malloy, seeking to distinguish himself from his Republican contemporary in New Jersey, Governor Chris Christie, presented his tax increases as fair and equitable. Amid measures designed to attack spending, Mr. Malloy had deployed “a new way.” Mr. Christie and, surprisingly, Democratic Governor of New York Mario Cuomo both had submitted budgets that contained no tax increases. Mr. Malloy’s budget has a massive doughnut hole in it. Although the Democratic dominated senate passed Mr. Malloy’s plan, the budget was not in balance at passage because state unions, called upon by Mr. Malloy to give back $2 billion in order to balance the budget, are still negotiating the give backs with the governor’s office.

Over in Massachusetts, once derided by nutmeggers as Taxachussetts and now called Wisconsin East, the Democratic denominated House overwhelmingly pushed through a measure that considerably reduces the political heft of unions by eliminating collective bargaining.

“It’s pretty stunning,” the president of the Massachusetts AFL-CIO said. “These are the same Democrats that all these labor unions elected.”

The most accurate way to describe Mr. Malloy’s budget is – not stunning: It raises taxes, does not touch the wellsprings of public debt, provides the usual billion dollar surplus and is has not produced fevered objections from the free spending left, with the possible exception of uber-liberal Jonathan Pelto.

Governor Malloy’s Budget Intentions

Governor Dannel Malloy announced in a meeting with his commissioners of state agencies that he would cut $2 billion from the projected annual costs of state services. Mr. Malloy proposes to eliminate 55% of the state’s deficit with spending cuts and 45% with tax increases.

Three points ought to be considered. First, the state debt Mr. Malloy hopes to discharge with his particular distribution of spending cuts to tax increases is a projected deficit. In the past, such projections have not been accurate. The final figures for the next few fiscal years may be higher.

Second, just as a man is no island unto himself but each is a part of the whole, so no state is an island unto itself. Mr. Malloy has said or implied repeatedly, both before and after his election, that his approach to budget matters will make Connecticut competitive with other states or, at the very least, will not tilt the economic playing field in favor of competing states, so that the flow of business, entrepreneurial and human capital -- most especially young people who have been fleeing the state for greener pastures elsewhere – might be reversed in Connecticut’s favor.

In this regard, it may be important to point out that the newly installed Democratic Governor of New York, Mario Cuomo, has vowed to attack his state’s budget deficit without recourse to new taxes. The Cuomo plan involves closing a $10 billion budget gap by freezing wages and taxes, limiting spending growth to the rate of inflation and consolidating departments, while Mr. Malloy proposes to raise nearly $1.7 billion in new revenue. Mr. Cuomo has also proposed a cap on property taxes, setting up a fight to the death struggle between the governor and a tax thirsty state legislature.

Third, Mr. Malloy must get his budget project approved by a Democratic caucus that in the past has not been in favor of cuts adversely affecting unions credited with Mr. Malloy’s election as governor. Effective cuts of this kind would be permanent, reaching far into the future; they also would represent disinvestments in areas where the state’s growth in spending has in the past been resistant to reductions. An end to binding arbitration, for instance, would allow municipalities to control their own destinies. One supposes that measures of this kind – precisely because they would be effective in controlling future costs – would be vigorously resisted by Speaker of the House Chris Donovan, who in the past has shown himself to be unusually attentive to union interests.

Both co-chairwomen of the budget-writing Appropriations Committee, Sen. Toni Harp and Rep. Toni Walker, cautiously greeted Mr. Malloy’s announced intentions. Ms. Walker said she looked forward “to seeing where exactly those reductions will come from. We have nothing concrete yet." It is the Democratic dominated legislature that first adjusts and then sets in concrete Mr. Malloy’s budget plan.

In the meeting with his agency heads, Mr. Malloy unfurled four principles guiding his budget decisions: He would refuse to borrow money through bonding to pay down current expenses, “absolutely fund our pension obligations next year - and all years,” not rely on early retirements to cut expenses, and force state government to live within its means by changing the state “in a profound way.”

Mr. Malloy’s intentions will become clearer after he presents his budget to the Democratic dominated General Assembly. Connecticut’s red ink arises from a disproportion between revenue and spending. Debit in Connecticut has not been caused because legislators and previous governors have been uninventive in creating “tax investments” that increase revenues. The state is up to its knees in red ink because the rate of spending has increased precipitously over the last two decades following the institution of an income tax that made it possible to boost revenues and add surpluses to the general fund. Consequently, the ravenous beast that was fed got fatter – and considerably more demanding. It is now eating up the state’s seed corn.

It took the state of Connecticut about ten years to recover jobs lost during the milder recession that followed the institution of the Lowell P. Weicker Jr. Income Tax, which turned out to be a license to spend. Any solution to the disparity between getting and spending that does not PERMANENTLY reduce spending by about 25%, while holding the line on taxes during what promises to be for Connecticut a far more protracted recession, will not succeed in properly positioning the state relative to contiguous states so that, when the recession gives way to a rising tide, Connecticut’s ship of state can speed forward on the crest of the tide, rather than being stranded on a sand bar of its own making.