Politics & Policy

Connecticut Breaks Some Bad Habits

Connecticut state capitol in Hartford (Photo: Natalia Bratslavsky/Dreamstime)
Sluggish and out of fiscal shape, the state of Connecticut is trying new habits.

Connecticut was once the quiet, conservative, low-cost option for people who wanted to work, but not live, in Massachusetts or New York. Tucked away from the hustle and bustle of metropolitan areas, the state was once known as the Land of Steady Habits. Unfortunately, Connecticut’s latest habit has been raising taxes.

Soon, though, the Land of Steady Habits will have a chance to start a new habit: reform. Reached through compromise and grueling negotiations, a budget was recently passed that, while far from perfect, reflects the direction Connecticut can take if reformers are in the room when the decisions are made.

For years, Connecticut binged on spending. No government program was too big, and every government union was too small. Spending habits were ingrained, automatic, unthinking, and reflexive. Elected officials handed out top-shelf pensions and benefits. When the state’s bank statement got short, the solution of first resort was either a tax hike or getting out the credit card.

Connecticut’s unhealthy fiscal lifestyle has had consequences. Small businesses such as Borgeson Universal left. Big businesses such as General Electric left. And now Aetna is leaving. Individuals, too, are moving out of the state at an alarming rate. After the credit-rating agencies took a closer look at how Connecticut was managing its money, the state’s credit card got cut in half, and its rating was downgraded. Even as the rest of the country has recovered from the Great Recession, Connecticut finds itself in the midst of a fiscal crisis.

This once-prosperous state is out of fiscal shape and unattractive to business, and its capacity to borrow is maxed out. Big change is needed. The bigger the change, though, the more time it will take, especially in the Land of Steady Habits.

The recently passed budget begins to tighten Connecticut’s overburdened belt. It imposes a cap on bonding, a baseline for saving, and a path to a true constitutional cap on state spending — for the first time since voters mandated such a cap in 1992. The new budget also engineers ways for state and local officials to find more savings themselves. Prevailing-wage thresholds were increased (allowing more expensive projects to be undertaken without the requirement to pay “prevailing” — i.e., union — wages); binding arbitration now partially takes into account a town’s ability to actually pay for services; and towns are afforded greater access to cost-saving voluntary shared-services agreements with neighboring communities.

Perhaps most important, however, is the budget’s implicit recognition that government unions have been wielding too much power in Hartford. In Connecticut, collectively bargained state-employee contracts were technically subject to legislative approval. The General Assembly has traditionally balked at this responsibility, instead relying on an arcane mechanism that spared officials from going on the record and allowed contracts to simply slide into law without a vote.

Perhaps most important is the budget’s implicit recognition that government unions have been wielding too much power in Hartford.

The new budget included a mandate that the legislature cease abdicating this authority. Now, lawmakers must go on record and be accountable for their votes. That kind of change would have been unthinkable if not for the more reform-minded legislators’ recognizing and working to fix the unbalanced relationship between government unions and the state government itself.

All that said, certainly this budget is far from perfect. Proving that steady habits are hard to break, it has some tax increases, including taxes on cigarettes and ride sharing and the elimination of local property-tax credits for many households. Much of the revenue depends on the approval of a complex agreement with the federal government relative to the state’s hospitals and the taxes they pay. Lastly, the entire package is, unfortunately, grounded in a previously passed extension for public-sector pay and benefits that locks in approximately 40 percent of the state’s budget until 2027.

Truth be told, Connecticut’s finances were out of balance almost immediately after passing this recent budget thanks to the continued erosion of state tax receipts, necessitating a small fix. This problem, though, only highlights the need for continued reform and the benefit of having leaders who are willing to be honest with themselves about how much work remains to be done.

No one gets in shape overnight. It takes hard work, dedication, and time. Connecticut and its legislative leaders have been hard at work, even though they’re running out of time. Those who demand greater and more far-reaching reform have an important task before them: They must ensure that more reformers are elected to swell the ranks of those who worked so hard on this budget to begin the process of turning our state around.

— Joe Horvath (@JAndrewHorvath) is the director of legislative outreach for the Yankee Institute for Public Policy. Learn more at yankeeinstitute.org.

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