Thursday, November 15, 2012

The New Budget Gimmickry


It’s extremely important for politicians to hide horrors before elections. One shudders to think how voting in Connecticut for the General Assembly might have changed if Connecticut’s eminently dupable citizens had known before they entered the polling booths that their state was running a deficit of $365-million.

The admission that Connecticut was running a deficit large enough to require Governor Dannel Malloy to submit a deficit mitigation plan to the General Assembly came nine days after votes were tallied in Connecticut. State law requires the governor to submit to the General Assembly a deficit mitigation plan whenever a budget deficit reaches 1 percent of general fund spending.

State statute requires Mr. Malloy to submit to State Comptroller Kevin Lembo a deficit mitigation plan. After Mr. Lembo certifies the deficit on December 1, the governor is required to present his plan to the Democratic dominated General Assembly.

Members of the General Assembly no doubt were – SHOCKED!!! -- to hear the governor’s budget chief Ben Barnes, Secretary of the State of Connecticut Office of Policy and Management (OPM), tell the members of the Appropriations Committee on November 14 that the deficit was indeed a startling $365-million.

Mr. Lembo had an intimation, possibly before the elections had been concluded, that the deficit was big. But this big? How could anyone know?

Mr. Barnes assured the committee that he had not dozed off before the election vote tally. He was fully awake: “Please know that my office has already begun work on this plan, and while I’m not prepared today to address any elements that might or might not be included in that plan, you can expect that we will announce specifics as soon as possible.”

The governor, who in the past had accused his Republican predecessors of engaging in budget gimmickry, was surprised, we are to suppose, by the size of the deficit, a good portion of which, $260 million, was attributed by Mr. Barnes to an unanticipated increase in the Medicaid caseload.  “The enacted budget,” Mr. Barnes told the members of the Appropriations Committee, “did not assume the current caseload of 83,827 would be reached until August 2013,” Barnes said.

But of course: Budget figures are only as good as the assumptions made by those compiling budgets. Who knew?

If there is a single reporter in the state who did not suspect Connecticut’s budget was hugely out of whack before Mr. Barnes' belated admission on Wednesday, he or she should be fired by their Managing Editors.

Before Mr. Barnes' reluctant and tardy admission, Mr. Malloy was corralled by a reporter and asked to dilate on what precisely he planned to cut in order to bring his budget into balance.

These are decisions, Mr. Malloy said, yet to be made. The governor, the architect of the largest tax increase in state history, had told reporters days earlier – three times in a single interview no less – that he would not raise taxes to balance his budget, recalling earlier professions by other chief executives, the most memorable of which was former President George H. W. Bush’s pledge: “Read my lips -- no new taxes.”

“What would really be nice,” the governor confided to the reporters, “is if they would settle some of these issues in Washington so that the budget I present in February actually builds in whatever changes” are made.

Asked the same question – what was to be cut in the coming budget -- Mr. Barnes offered coyly, “Government spending. State government spending. That’s about as specific as I’m going to get ... You act as if I have in my mind a full list of what we’re going to do and I don’t yet. We’re working hard to do that. Until we get through that process and work with the governor and make sure we’re right on what the deficit is going to be, it’s way (sic) premature for me to discuss what any kind of plan in the future’s going to be.”

However dark the deficit cloud, a ray of sunshine, one CTNewsJunkie reporter noted, pierced through: "Malloy and Barnes both expressed hope that the state may benefit from a one-time revenue spike generated by people selling off capital gains this year in an effort to avoid new federal taxes next year (emphasis mine)."

To put the matter clearly, Mr. Barnes and Mr. Malloy hoped to receive a mini-bonanza from the quarter millionaires taxed by a newly re-elected President Barack Obama, who claims to have received from the people a mandate to increase the capital gains tax on business producers. The business producers are expected by Mr. Barnes and Mr. Malloy to sell off their capital gains to avoid paying Mr. Obama’s onerous anti-entrepreneurial tax, but Connecticut will reap additional revenues from the selloff that then may be applied to reduce the state’s equally burdensome $365-million deficit.

This budgetary persiflage is, of course, a one time, temporary patch – precisely the sort of “fix” Mr. Malloy charged against his Republican gubernatorial predecessors.

And after the fix?

Comes yet another deluge of taxes – either higher state taxes imposed by Mr. Malloy or pass-alongs, cuts in state revenue sharing directed at municipalities which, of course, will require increased municipal taxes to plug state induced gaps in municipal budgets.

Or – a modest suggestion from the vastly outnumbered Republican loyal opposition in the General Assembly -- the governor can just cut spending like other prudent cost conscious governors, many of whom are Republicans.
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