Wednesday, May 13, 2015

Budget And Business Stability Take A Hike In Connecticut

Very quietly and without any fanfare, Governor Dannel Malloy on May 11 began negotiations on the state budget with Democratic legislative leaders Senate President Pro Tem Martin Looney and House Speaker Brendan Sharkey. The two leaders days earlier had given their approval to a finance committee approved budget that raised taxes considerably and was light on spending cuts. A budget produced by Republicans was its opposite number. Perhaps taking Mr. Malloy at his word, the Republican budget was balanced and contained no new taxes – just the sort of budget Mr. Malloy might have approved, if he took seriously his own campaign pledges. Several times during the gubernatorial campaign season, Mr. Malloy embraced a no new taxes budget plan. The budget Mr. Malloy presented to the General Assembly was out of balance and, said its critics, rather severe on groups of people who are forced by circumstances to throw themselves on the mercy of strangers.

Something has to give.

Mr. Malloy’s gentlemanly discussion with the two Democratic shakers and movers in the General Assembly occurred at the same time Republicans were holding a public hearing on budget proposals. Hearings are becoming rare in Connecticut’s one party state. Mr. Malloy’s first budget, which contained the largest tax increase in state history, was cobbled together without any Republican Party input, as befits an autocratic state. The recent finance committee budget was not vetted at a public hearing and, of course, Mr. Malloy’s meeting with Mr. Looney and Mr. Sharkey was held behind closed doors. Before entering those closed doors, Mr. Malloy expressed his displeasure with all budgets not his own.

The Republican budget hearing, Mr. Malloy suggested, was a dog and pony show that could be safely ignored. Executive director of the Connecticut Citizen Action Group Tom Swan was unimpressed. The hearing, said Mr. Swan, was not officially authorized; but then the arrarachicks in any one party state usually proceed on their merry way without consulting the general public, and one could hardly expect Democratic leaders such as Mr. Looney and Mr. Sharkey to hold a public meeting on a budget proposal they approved in the absence of a public hearing.

The Republican hearing – which centered on the unintended and unadvertised consequences of the finance committee budget rather than the Republican alternative budget, gave Republicans, Mr. Swan groused, the opportunity to posture shamelessly while they "regurgitated talking points" about the relationship between businesses in the state and progressive budget proposals. The progressive budget thrown out by the Democrat controlled budget writing committee was, Mr. Swan enthused, "far superior to any other options currently on the table” – including, one must suppose, Mr. Malloy’s unbalanced budget proposal.

Mr. Malloy predictably disagreed with Mr. Swan’s assessment. While he has no intention of holding over the heads of Democrats a veto of the finance committee budget – that would be rude -- he preferred his own proposal. Interview by reporters on the day of the Republican budget hearing, Mr. Looney and Mr. Sharkey said they had not listened on CT-N to the Republican hearing and then bustled off to their private audience with Mr. Malloy.

"We believe that hard decisions have to be made," Mr.  Malloy told reporters. "We believe that we need to be concentrating on building a sustainable budget. We began that work four years ago. We continued it two years ago. This is not the time to reverse our path or trajectory." These sentiments, suggesting a stern disapproval of the finance committee budget proposal, very likely caused Mr. Swan to break out in fever bumps.

The Democratic budget drops the sales tax rate from 6.35 to 5.85 percent effective next July and for the first time extends the sales tax to 25 services previously not taxed. Along with some clever legerdemain removing pension payments from the budget cap for instance – the finance committee proposal added new revenue to Mr. Malloy’s out of balance budget sufficient to produce a small surplus, which quickly disappeared when projected revenues fell short of the mark.  The finance committee budget increases the marginal tax rate from 6.7 to 6.99 percent for those who earn more than $500,000. These adjustments are expected to produce a tax and fee receipt increase of about $1.8 billion. Given the new – some would say punishing --  billion dollar revenue increases piled on top of a recent $2.6 billion Malloy tax increase, the largest in Connecticut’s history, it is not surprising that the Swan approved budget should have occasioned commentary from state businesses and the workers they employ.

The Republican hearing, which sent attendees into two over-flow rooms and featured about a hundred people who signed up to speak, was well attended by the general public, and it is a great pity the two Democratic leaders of Connecticut’s General Assembly could not spare a few moments to audit the testimony of their constituents. Even in a one-party state, it would be wise for autocrats to pretend to lend an ear to a vox populi bitten by insupportable taxes and business crippling regulations. Autocratic indifference to the plight of common folk in 1789 gave rise, as we know, to a French Revolution that swept a self-satisfied, tin-eared administrative state from power. Guillotines were everywhere.
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