Thursday, April 30, 2015

Killing The Cap, Raising the Revenue Roof

Managing Editor of the Journal Inquirer Chris Powell notes in a recent column that Connecticut’s constitutional cap on spending has over the years been easily surmounted by governors and legislators determined to spend money. And indeed, spending has spiraled in the state. Governor William O’Neill's last pre-income tax budget was about $7.5 billion. Connecticut’s current biennial budget is hovering around $40 billion, and the Democratic dominated General Assembly has not yet finished tinkering with it.

By broadening the sales tax while reducing the sales tax rate and removing from under the spending cap pension payments for state workers, progressive magicians in the General Assembly are now in the process of transmuting a multi- million dollar deficit into a multi-million dollar surplus. Spending in Connecticut has tripled within the space of four governors, one of whom was independent Governor Lowell Weicker, the father of Connecticut’s income tax.

Mr. Powell notes that the constitutional cap “has been evaded many times and has never been anything but a deception, a sop to disgruntled taxpayers for enactment of the state income tax in 1991.” Evasion has been made effortless by the failure of legislators to define the terms of the spending cap.

The spending cap legislation itself is far more lucid – and many hundreds of pages shorter – than former US Senator Chris Dodd’s mega bill, Dodd-Frank, or the unreadable and unread Obamacare legislation. The spending cap bill limits the increase in general budget expenditures to the five year average in personal income growth or the 12 month rate of inflation, whichever is greater, and the bill stipulates reasonable exception to its own strictures. The bill stipulates that “general budget expenditures” include “all state spending” except: payments on the principal or interest of bonds, notes and other forms of debt; state grants to distressed municipalities (for grants in effect on July 1, 1991); first year expenditures on federal mandates or court orders. The bill further stipulates that the cap can be overridden only when the governor declares an emergency or the existence of extraordinary circumstances, after which at least 3/5ths of the General Assembly must  affirm the declared emergency.

That’s it – a fairly straightforward and simple bill, easily skirted, as Mr. Powell has noted.

Bill Cibes, formerly the head of Mr. Weicker’s Office of Policy Management (OPM), recently has written an op-ed piece for a Hartford paper urging that the cap be repealed. Mr. Cibes once ran for governor on an income tax platform. Soundly defeated, Mr. Cibes’ second act as Mr. Weicker’s OPM chief permitted him to shape and implement Mr. Weicker’s income tax bill.  If Mr. Weicker was the father of Connecticut’s income tax, Mr. Cibes was its wet nurse. Appended to the tax was the spending cap provision, a sop to weak-kneed legislators wavering in their approval of the income tax. Following his stint at the OPM, Mr. Weicker prepared a cushy bed for Mr. Cibes, whom he appointed President of the Connecticut State University System, an administrative apparat governing four state universities that since has expanded to include seventeen institutions presided over by President of the Board of Regents Gregory Gray.  If citizens object to the state’s big spenders, Mr. Cibes advised in his column, they can always vote them out of office. Constitutional restraints are both unnecessary and troublesome, according to Mr. Cibes, who has yet to demand the abolition of the First Ten Amendments to the US Constitution, widely regarded as a restraint on presidents and legislators who, in the absence of constitutional prescriptions, also may be voted out of office.

Mr. Cibes is not alone in considering the cap an impediment to improvident spending. Revising Governor Dannel Malloy’s out of balance budget, the House Appropriations Committee recently approved the withdrawal from the spending cap of more than $2 billion per year in contributions to pension plans and other retirement benefit programs, boosting a projected deficit into a substantial surplus, thereby eliminating the need of spending reductions.

New revenue raising measures both reduce sales tax rates while broadening the tax. Generally, Democrats intend to increase receipts by around $1.9 billion in the next biennial budget. Bottom line: Connecticut’s revenues will be raised by an amount sufficient to eliminate prospective deficits and leave the Big Spenders with a sizable surplus to satisfy those special interests, among them state workers unions, that have collared state government.

The debate on removing state pensions from spending cap strictures has produced a thought bubble from Toni Walker, the Democratic House chair of the Appropriations Committee. The cap, Ms. Walker said, is “like this fictitious instrument that is always used as a talking point. We’ve got to really examine what is the purpose of the spending cap, and is it really serving the people of Connecticut the way we need it to?”

Of course, the “purpose” of spending cap legislation is evident from both statutory and constitutional provisions, artfully and assiduously violated by Big Spenders in Connecticut’s General Assembly. The purpose of the spending cap is -- big surprise --  to cap spending. People determined to violate the cap, Ms. Walker among them, so far have done so with impunity. But let us not misidentify the instruments driving Connecticut to Hell in a hand-basket. It is not the cap that forces legislators to violate the cap. At the root of Connecticut’s budget problems lies a quenchless lust for spending money, which will not be abated by the legislature’s equally quenchless lust for appropriating new revenue. In the long term, Connecticut cannot survive such thoughtless – and apparently endless -- greed.
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