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Voices Speaking

January 23, 2017

Voices from the Capitol (III): Budget Talk

Roger Senserrich

We have a new President, but that does not mean that the work at the General Assembly is slowing down. This week we have a look at the new revenue estimates, possible  revenue sources to balance the budget, our analysis of the Children's Budget, and our new report on property tax reform. Let's get started.

The latest: consensus revenue estimates - January

State law directs the Office of Policy and Management (OPM), the Office of Fiscal Analysis (OFA) and the State Comptroller (that is, the budget agencies for the executive and legislature, plus the elected official who keeps track of the figures) to release a consensus revenue estimate a few times during the year. We just got a new one today.

Why is this consensus estimate important? It serves as the basis for the Governor's proposed budget and for the budget that the legislature will approve.

Last week's consensus revenue estimate has some mixed news. For the current budget year (FY17) the state now has a small budget surplus, thanks to stronger-than-expected growth in business tax revenue. Sales and income tax collections, however, are less than expected, keeping the surplus at a modest $10 million. This at least is a welcome contrast with last year, when FY16 collections constantly missed their targets, prompting several rounds of additional budget cuts.

The new revenue estimates have also left the budget projections for FY18 and onward largely unchanged. That is, Connecticut is still facing deficits above $1.4 billion a year; this adjustment only reduced the projected gap for FY18 by $31 million.

In other words: still a dire budget, but at least it is not getting worse.

Spotlight: a look at the state budget

Tomorrow, Connecticut Voices for Children will be hosting our 16th Annual Budget  Forum at the Capitol to provide a clear, broad overview about the state's fiscal situation. Here are the highlights of the four policy briefs and reports that we  will discuss tomorrow. They will  form the basis of our advocacy work this session.

Revenue options

Long term investments in children and families have been the cornerstone of the state's prosperity. To preserve these investments and support long term economic  health, a balanced approach to the upcoming biennial budget must include new resources.

In this report, we explore what the current challenges are facing Connecticut's tax system and provide several possible tools to modernize and update it whilealso raising needed revenue. You  can download the full report here.

Equal funding for equal effort: property tax reform

Connecticut relies on property taxes to fund local government and public education.This arrangement gives municipalities local control and flexibility, but also makes residents in poor communities pay more, stifles economic development, and exacerbates racial inequalities.

In this report we explore a partial solution to this problem: a system in which communities that tax themselves equally for education receive equal per-pupil funding.Our model would cut taxes for 2.7 million residents in 117 cities and towns, while maintaining local control and education funding levels.
As the General Assembly considers changes to education funding, this will be especially relevant this session. Make sure to read the report here

The Children's Budget:

In our new report we find that the share of the state budget devoted to children  has reached a record low, down to 29.5 percent of overall spending. Although absolute spending in the Children's Budget has risen modestly since 2008 (by $269.1 million or 4.5 percent, in 2017 dollars), the increase in spending in other budget areas  has outpaced investments in children.

We will present the full policy brief tomorrow at the budget forum. You can download it here.

Business tax breaks:

Next week we will look at the growing cost of business tax breaks in Connecticut's state budget. We will provide a sneak peek of the report at tomorrow's Budget Forum.

For a primer in business taxes in Connecticut, do not miss this article by Derek Thomas from earlier this year.

Still time to register: State Budget Forum

Tomorrow we will convene at the State Capitol for Connecticut Voices for Children's 16th Annual State Budget Forum: "Building a Budget for Connecticut's Future."

  • WHAT: 16th Annual State Budget Forum.
  • WHEN: January 24th from 8:30 AM to 12:00      PM.
  • WHERE: Old Judiciary Room, State      Capitol, 210 Capitol Avenue, Hartford.
  • REGISTRATION: please RSVP here.Seating is limited.

Participants will include Governor Malloy,  Secretary Benjamin Barnes, Comptroller Kevin Lembo, Mayor Ton Harp (New Haven), and Representative Vincent Candelora, among others. Please visit our event page for more information, or e-mail Ray Noonan with any questions.

This Week: Committee Meetings

Another week of committee meetings, as legislators begin to map out the work ahead this legislative session. Committee members and chairs continue discussing what bills will be raised and will begin to draft committee bills.

This means that this week we will see again quite a few committee meetings: Transportation, Environment and Appropriations today; Housing Tuesday; Public Health and Planning Wednesday; Aging, Public Safety, Higher Education, Human Services, and Veteran's  Affairs Thursday; and Environment again on Friday. The agenda for each meeting is usually posted the day before on the CGA website. This week, committees will be mostly voting on which bills will be drafted as committee bills and/or get public hearings.

The full schedule can be found here We will keep you posted on any major decisions or bills to follow as we go along.

What we are reading

Issue Area:
Budget and Tax
Tags:
revenue estimates, tax, Voices from the Capitol
February 7, 2018

Statement on the Governor's Budget Proposal: a Call for a New Direction

Ellen Shemitz, J.D.

This past Monday, the Governor released an overview of his recommended revisions to the FY 2019 budget, with a focus on revenue and spending changes to achieve balance. Ellen Shemitz, Executive Director of Connecticut Voices for Children issued the following statement in response:

The long-term fiscal stability and health of our state depend upon economic growth that affords shared prosperity to families, businesses, and communities. This kind of growth can only occur in a state that has a competitive business environment, a prepared workforce, a commitment to race equity and a fiscally sound state government.

The state budget announced Monday by Governor Malloy includes some welcome and decisive steps to narrow our long-term deficit, move the state toward fiscal stability, and tackle some of our pressing infrastructure needs. The proposal, however, fails to recommend a number of structural changes essential to grow the economy and move toward sustainable, shared prosperity.

Last year’s budget created substantive and harmful restrictions on economic growth through the combined effect of a newly defined spending cap, volatility cap, bond cap and bond lock. To build a vibrant, inclusive economy and remain competitive, our state needs to make strategic investments in transportation, education, healthcare, workforce development, and early childhood: the very kind of bold investments that our neighboring states have already launched. To the south, New York City is moving toward universal free preschool for all three-year-olds. To the east, Rhode Island is offering free community college. Connecticut must similarly invest and innovate or be left behind.

We remain hopeful the Governor will offer a bold call for investment and innovation in today's budget address. We hope the Legislature will address some of the missing elements in Monday's proposal, such as full restoration of the Earned Income Tax Credit, modernization of our tax system, and targeted state funding to assure equity in educational opportunity.

But first, both the Executive Branch and Legislative Branch need to free themselves from the unintended consequences of last session’s fiscal restraints. They need to amend the spending cap, volatility cap, bond cap and bond lock so that our state is free to meet today’s fiscal, economic and social challenges.

Working together, we can open pathways to opportunity for every child as we build a solid, inclusive economic foundation that benefits all of our residents and communities.

Issue Area:
Budget and Tax
Tags:
bond lock, budget, investments, tax
March 30, 2018

Call to Action - Bond Lock Hearing Monday, April 2 - H.B. 5590

The Finance Committee will hold a hearing this coming Monday, April 2, to discuss a slew of new fiscal bills, including one to amend the Bond Lock: H.B. 5590, "An Act Concerning Covenants and the Bond Issuance Cap".

HB 5590 would not fully repeal the existing Bond Lock, rather it would partially delay implementation. Under this proposal, bonds issued after May 15, 2018, would include a covenant locking in the volatility cap. Bonds issued after the end of the session (July 1, 2019, onwards) would lock in the spending cap and bond cap.

While an improvement over current law, further change is needed. We are calling on the Finance Committee to amend the bill to:

  1. Delay the effective date of all provisions of the Bond Lock until July 1, 2019.
  2. Study and issue a report on the impact of the Bond Lock, with a committee hearing on the same, prior to the new effective date.

We urge you to join us in requesting passage of an amended bill. Inaction is not an option. Existing law poses real threats to our state. If implemented, the Bond Lock would:

  • Risk billions of dollars in cuts to social services and other crucial programs for children and families in the state.
  • Create uncertainty regarding Connecticut's fiscal health, potentially damaging our credit rating and increasing our borrowing costs.
  • Leave Connecticut powerless to respond to emergencies. We do not know what the federal government is going to do regarding funding. We don't know if a natural disaster is coming. With the Bond Lock, we will know that we cannot address any of these challenges without facing serious penalties.

We ask you to testify on Monday, April 2 and urge the Finance Committee to break the Bond Lock.

  • WHAT: Finance, Revenue and Bonding Committee public hearing
  • WHEN: Monday, April 2, 2018 at 10:30 A.M.
  • WHERE: Room 2E, Legislative Office Building, 300 Capitol Avenue, Hartford.
  • HOW TO TESTIFY: A lottery will determine public speaker order; sign up is from 8:30 A.M. to 9:30 A.M. in the first floor atrium of the LOB.  You can also email written testimony to FINtestimony@cga.ct.gov.

About the Bond Lock:

The Bond Lock is a provision included in the Fiscal Year (FY) 2018-2019 budget aimed at restricting changes to Connecticut's budget rules. It stipulates that whenever Connecticut issues a bond for a two-year period beginning in May, it must vow not to change three new spending and revenue restrictions—the spending cap, volatility cap, and bond cap— for the life of the bond (typically 10 years) except in extraordinary circumstances.

Because bonds are considered contracts, Connecticut would be legally bound to maintain these spending and revenue restraints despite what future Governors or legislatures might find to be in the best interests of the state. Any effort to break the covenant would invite litigation and risk significant penalties.

The fiscal restrictions that the Bond Lock cements into place all have significant flaws, threatening state investments necessary to build thriving communities. By making it virtually impossible to change any of these restrictions for more than a decade, the Bond Lock limits the state’s ability to address both existing and unanticipated challenges, today and into the future.

For more information about the Bond Lock, download our Bond Lock FAQ

Issue Area:
Budget and Tax
Tags:
action alert, bond lock, budget, cap, spending, tax
April 4, 2018

What is the Bond Lock?

On March 14th Connecticut Voices for Children held our ¨Breaking the Bond Lock" roundtable, where we explained in great detail the potential impact that this fiscal restriction will have on children and families. You can watch the presentation below. 

 

For a full analysis on the Bond Lock, a FAQ, and supporting materials, check our publications here

Issue Area:
Budget and Tax
Tags:
bond lock, budget, fiscal, tax

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