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Fiscal Watchdog: Novocaine Is Wearing Off

Fiscal Watchdog: Novocaine Is Wearing Off

Source: Kevin Maloney, New Haven Independent

Keith Phaneuf follows the money. And all roads lead back to Connecticut’s financial capacity.

Joining “The Municipal Voice,” the program hosted on WNHH FM by the Connecticut Conference of Municipalities, Phaneuf, who covers the Capitol as a reporter for the CT Mirror, told us that he’s always been drawn to the state’s “fiscal problems because they’re sort of the magnet that’s pulling our compass off course.” 

That’s true even now when the state has a full rainy day fund and balanced budget – which he likens to being on novocaine

Unfortunately, eventually the novocaine wears off and the pain sets in.

The pain here is the dual punch of a stock market that has “become disconnected with the rest of the economy” and income tax receipts that are padded with the increased unemployment benefits throughout the pandemic   –  where many people were making significantly more on unemployment than they were at their jobs.

He argues not that this was a bad thing: some people should not have been at work. But now that those increased benefits are over, income tax receipts should theoretically fall too.

Add to that the $90 billion in unfunded pension liabilities that have been built up for 80 years –  and the situation seems precarious.

While many people believe that we’ve had a “kick the can” policy when it comes to pensions, it’s actually more like “you’re rolling a snowball,” where the problem gets bigger over time, he said.

“State government finances don’t crawl out of that by having two great years on the stock market,” Phaneuf said.

Towns and cities often are bearing the brunt of this fiscal situation. Phaneuf notes that even before factoring in inflation towns and cities are getting less non-education aid than twenty years ago.

In responding to a question about HVAC repairs in our public schools, which CCM and a coalition of other organizations has called on the Governor and Legislature to help fund, Phaneuf said that often towns will choose teachers and programs over maintenance.

If they aren’t getting the money from the state, he asks, where do they come up with it?

For municipalities, this leaves them leaning on regressive taxes like the property tax – which disproportionately burdens low and middle-class families.

Phaneuf stated that say if you make less than $50,000 a year, then 25 percent of you earnings go to property taxes. But if you make over $1 million, then it’s closer to 7 percent.
Citing a CT Voices study, he asked if we are risking the long-term health of the economy by having so many families live paycheck to paycheck.

His outlook is dour on when the state will ever fully fund programs that it has promised to, saying that it’s more likely that apes will take over the planet.

Connecticut, one of the wealthiest states in wealthiest nation in the world, has a solution, but one that might make them the tenth wealthiest state instead of the top wealthiest state. But for Phaneuf, that seems like an obvious tradeoff.

“You’ve got the money, Connecticut,” he said, “Pay your bills and then don’t create those problems in the future.”

To watch this episode of The Municipal Voice, click here.