Point Counterpoint; Lori Pelletier, CT AFL-CIO vs. Joe Brennan, CBIA

Point Counterpoint; Lori Pelletier, CT AFL-CIO vs. Joe Brennan, CBIA

The following opinion pieces first appeared as part of a new CCM feature in the August issue of Connecticut Town & City, CCM's bi-monthly magazine.

 

How to Fix the Connecticut State Budget back to top

How to Fix the Connecticut State Budget

How to Fix the Connecticut State Budget

By Joe Brennan, President & CEO, CBIA

Policymakers can take two steps to fix Connecticut’s ongoing budget problems in a sustainable way: foster greater economic growth and set spending priorities based on the core functions of state government—what we need, not everything we want.

Our reality is crystal clear: we won’t fix our fiscal problems without greater economic growth.

We can argue over policy choices needed to remedy the situation, but we can't argue over the fact that Connecticut’s economic growth has been unacceptable.

In 2011, for example, the state’s economy actually shrunk by 0.9%, while the national economy overall grew by 1.4%. In 2015, our economy grew by 0.6%, compared with 2.4% for the nation overall, ranking Connecticut 43rd out of 50 states in Gross State Product.

Clearly, this has to change if we’re going to stabilize the state's fiscal condition, as well as the fiscal condition of Connecticut's 169 cities and towns.

One thing we know won’t work is additional tax increases.

How do we know this? Despite two of the largest state tax increases in state history over the last five years, we still have massive recurring budget deficits and even greater long-term, unfunded liabilities.

As Connecticut’s taxes rise and economic growth stagnates, too many residents—and some businesses—are seeking more favorable locations.

Seven states lost population between July 1, 2014, and July 1, 2015, with Connecticut experiencing the third-highest net loss: 3,876 people, or -0.11%.

An analysis by McKinsey & Company released earlier this year shows that much of the state’s outmigration is occurring among our youngest and most well-educated citizens.

In 2014, 42% of the 18,367 people leaving the state were ages 18–24.

That same year, Connecticut had a net loss of 11,570 people 25 years or older with at least an associate’s degree or some college; 33% of those held bachelor’s degrees, and 16% graduate degrees.

Wealth is also leaving the state.

From 2012 through 2013, the average adjusted gross income (AGI) of households moving to Connecticut was $91,000, while the AGI for those moving out was $112,000—a trend with serious implications for state tax revenue.

Since tax increases are not bringing in the expected revenues and cannot be relied upon to fix the state budget, the obvious solution is to aggressively pursue structural reforms to state government that cut costs and reflect better prioritization of spending.

Every state agency’s operations and management structure should be thoroughly audited to identify ways to cut costs, lean processes, and reduce head count through attrition. That way, we can meet the needs of state residents while keeping Connecticut affordable.

Part of this task must also be to ensure that public-sector compensation and benefits packages are affordable for taxpayers.

And lawmakers must fully enact a workable spending cap without loopholes, which was part of the deal with taxpayers in 1991 when the state income tax was passed, to help avoid fiscal problems in the future.

Business owners and entrepreneurs need confidence that the state will exercise fiscal discipline if they’re going to invest in Connecticut, create jobs, and grow the economy.

Holding the line on state spending sends a signal that Connecticut is a great place to invest and grow, and we need that investment now.

Austerity Hurts the Economy back to top

Austerity Hurts the Economy

Austerity Hurts the Economy

By Lori J. Pelletier, President of the Connecticut AFL-CIO

Connecticut has an austerity problem. Exhibit A is the recent state budget that legislators rammed through at the last minute in May.

What has austerity bought us so far?

Layoffs of public service workers like corrections officers, police and para-educators – even revenue-generating interpreters for the deaf and hard of hearing. Closing of state parks and laying off lifeguards. Cutting daycare subsidies for low-income parents who need them so they can continue to work and be productive.

It has made us less safe and with a diminished quality of life that is so cherished in our state.

What’s more, the governor’s much hyped “no tax” budget merely pushed the burden of responsible governing to our cities and towns. While the state layoffs are making the headlines, it’s easy to miss the myriad of other stories about increases in property taxes, cutting of municipal services, or the layoffs of workers in our school districts. Vital services once provided by the state are now being pushed down to the city and town level – for example, handling unclaimed human remains.

Laying off and not filling vacancies for over 2,000 state workers has a ripple effect across the economy, further squeezing small business owners. Austerity policies don't lead to growth, only less money in consumers’ pockets and a bigger economic crisis from which to dig ourselves out.

We need to promote policies that grow the economy and make it work for everyone, not just the wealthy few. The Connecticut AFL-CIO advocates a broad range of solutions.

Increasing revenue in the state. This can be accomplished by passing a low wage employer fee, collecting a larger share of taxes on internet sales, and closing the Expedia loophole.

Currently, certain large employers in the state pay their workers such low wages, they are eligible for state-subsidized health care, housing, and food stamps. The low wage employer fee would recoup hundreds of millions of dollars from companies (like Wal-Mart and Dunkin Donuts) that exploit our social safety nets at taxpayer expense.

Tightening laws on internet sales and online travel companies would not require an increase in taxes, but instead would close loopholes and raise tens of millions of dollars for critical public services. Closing these loopholes will help small businesses located in Connecticut who already play by the rules and must compete against online companies that take advantage of these loopholes.

Reforming our business and individual tax system. Creating a progressive business tax structure, which encourages growth instead of the current system of picking winners and losers. Allowing our personal income tax collection to incorporate 21st century delivery of earnings (e.g., capital gains and independent contractors).

Ending costly privatization and outsourcing schemes. Over the past year, the public has witnessed what happens when you outsource work that can be performed by state employees. The DMV software upgrade, done by a private for-profit company, has caused increased wait times and listed vehicles in the wrong municipalities. Outsourcing this work has been a terrible failure and cost the state millions of dollars with nothing but a broken system to show for it.

The challenges of fixing the state budget are large, but not insurmountable as long as we focus on growing the economy for everyone. Let’s continue to make Connecticut a state that values its working people and provides an exceptional education system and quality of life that is the envy of the country.