Saturday, March 14, 2009

The Evolution of a Budget Debate, Magic Money, Unanswered Questions

Before Governor Jodi Rell presented her budget address to the assembled legislature, she had issued warnings that serious cuts would be necessary to balance a budget that, looking down the road, was around $8 billion in the red, a figure certain to increase.

But the most immediate problem facing the legislature was a short term current budget deficit of about $1.35 billion, a more manageable figure.

Connecticut had not faced these kind of deficits since its last pre-income tax budget. The state chose to settle the last pre-income tax budget deficit by instituting an income tax proposed in the early 90’s by then Gov. Lowell Weicker. The $8 billion deficit the state of Connecticut now is facing is larger than the last Gov. William O’Neill pre-income tax budget of about $7.5 billion, and naturally all legislators and the governor wish to be regarded as serious in discharging their fiduciary responsibilities.

Unlike the federal government – which borrows money from foreign entities and may print money to cover its debts, thereby increasing inflation – state governments, including Connecticut, must pay their debts as they go, with real money. There are two and only two ways to do this: The state may “earn” money to pay its debts by raising taxes on its citizens, or it may cut its expenses.

The leadership of the state legislature, controlled by Democrats, and the governor both have chosen to settle the state’s short term debt and put off to a later day proposed solutions to the larger pink elephant in the room, Connecticut’s growing $8 billion deficit.

Debt is debt, and there are only two ways to discharge deficits, through tax increase and spending cuts.

But look here: Just as push was coming to shove, at which point the legislature might have been forced to settle on one of these two means to liquidate the state’s short term debt -- the puny and manageable $1.35 billion deficit, not the long term, planet swallowing, looming $8 billion defict – Democrats looked around and found a most amazing and magical shoe box in the state’s closet that no one, apparently, knew was there. There were “hidden savings” in the state's off-budget accounts amounting to about $220 million, a figure disputed by the governor's office.

"The governor was unaware of these hidden accounts from the start," said Speaker of the House Chris Donovan. "We did the hard work to find these savings, and the status of many of them is still being concealed by the administration. The officials assigned by the governor to 'help' the appropriations committee review the off-budget accounts have not worked with the appropriations committee chairs. Instead, they have come to their own conclusions about these funds. We are pleased to see that they have found tens of millions of dollars in savings, and we are confident we will be able to find significantly more."

Democrat leaders quickly scooped up these “hidden savings” and propose to apply them to the state’s short term deficit, sparing their constituents the necessity of an immediate tax increase but, more importantly, sparing Democrat lawmakers the necessity of asking state unions to make strenuous economies – for now.

Got a few questions here: The “savings” Democrats have “found” in “hidden” accounts should be regarded as the last of Connecticut’s surpluses. All the state’s previous surpluses, billions of dollars, were dumped into the general fund and spent, jacking up the bottom line of future budgets. And the same is true of these savings realized from off-budget accounts. If the money in these accounts is hidden surplus money -- that is, funds neither appropriated in on-line budgets and apparently unnecessary to the functioning of state government -- why are the funds there?

Why are the hidden accounts themselves there? If they are “hidden,” from whom are the accounts being hidden?

How long have the hidden accounts been in existence? What happened to the surplus money in the accounts that were not discovered earlier by watchful Democrats? Who spent it? On what did they spend it? Will Democrats propose to pull the hidden accounts into the general budget, where they can be more easily monitored?

Do Democrats leaders in the state legislature, President Pro Tem Don Williams in the Senate and Speaker of the House Chris Donovan, propose to cut future taxes by eliminating unnessesary surplus off-budget funds in accounts that “save” them, thus reducing spending for those off-budget accounts? Permanent long term cuts to the “hidden” surplus savings from these accounts in the future would be a real “savings” and a real “cut.”

And one more question: Why aren’t reporters asking the Democrat leadership in the House and Senate these questions?
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