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Malloy's Strategy Looking Better Than Cuomo's

State Budget: Connecticut has a surplus, but there are still problems down the road

The Hartford Courant

December 02, 2011

Just a few months ago, Connecticut's Gov. Dannel P. Malloy was being compared unfavorably with fellow Democrat Andrew Cuomo, who was praised for trying to eliminate New York's recession-induced state budget deficit without raising taxes.

Mr. Cuomo drastically cut services and municipal aid instead, dropping a large burden on local officials. Mr. Malloy took a different route to balancing a budget that also was billions of dollars out of whack. So far the Malloy way of achieving fiscal stability has paid off — at least for the short term.

Beating the drum for "shared sacrifice" and keeping the social safety net intact, he won legislative approval of a two-year budget that calls for $1.4 billion in tax increases, about $800 million in spending cuts and a promised $1.6 billion in union concessions.

In contrast to Mr. Cuomo's Empire State formula, in Connecticut there actually is a slight increase in state aid to municipalities. The tax increases authored by Mr. Malloy are the highest in the state's history.

Gov. Cuomo: Finances 'Collapsing'

How have things turned out for the two Democratic governors who took different paths?

This week, Mr. Cuomo admitted that New York's financial situation is "collapsing," and he spoke of possibly having to raise taxes by $3 billion or more to balance the budget.

Meanwhile, in Connecticut, the legislature's nonpartisan Office of Fiscal Analysis has projected a $101.2 million surplus this fiscal year, and much larger surpluses in each of the following four fiscal years.

These are the big tax increases at work. After too many years of borrowing to cover operating expenses — a practice forbidden by Mr. Malloy — and using other budgetary smoke and mirrors, Connecticut has a more or less honest balanced budget.

The situation could easily change, of course, due to the volatility of the stock market and the fragility of the slowly recovering economy. Or if promised savings from such sources as employee suggestions (a $90 million item in the budget, by agreement with state unions) do not materialize.

Connecticut's Looming Headache

The projected surpluses allowed Mr. Malloy's budget director, Ben Barnes, to say that "we are in much better shape than many states … We have solved this short-term problem." But he was also right to observe that Connecticut has "significant long-term liabilities" — more than $71 billion in long-term debt, one of the highest per-capita burdens of any state, according to the Connecticut Mirror.

Although some steps have been taken to rein in the state's huge health care and pension obligations, much more needs to be done. New employees, for example, should be switched to less costly 401(k)-style retirement benefits. Overtime should not count in pension calculations, a practice that leads to abuses.

Further, the emphasis should continue to be on downsizing state government — as when Mr. Malloy announced recently that he would not fill 2,300 vacant executive branch positions, about 5 percent of the state workforce. That will save $55 million.

The projected surpluses suggest that the record tax increases that Mr. Malloy asked for to balance the budget could be too high. Connecticut taxpayers don't want to be overtaxed any more than they want to waste money by borrowing to pay operating expenses.

If the revenue keeps rolling in, temptation to spend it in new or unwise ways will inevitably arise. Mr. Malloy could lose much of the hard-won acceptance for his shared-sacrifice budget.

Better to restore the state's cash reserves and then give taxpayers some relief.