New budget leaves a huge mess to clean up in 2011

“If anyone thinks we’ve solved this economic crisis with this budget bill …#045; you’re kidding yourself.” Rep. William A. Hamzy

By Keith M. Phaneuf
Journal Inquirer

Published: Tuesday, September 1, 2009 9:38 AM EDT

HARTFORD — Though the $1.2 billion of tax hikes in the new state budget dominated debate at the Capitol, the same package digs a fiscal hole more twice that size.

And it’s a hole that state officials — and taxpayers — must fill in just two years.

More than $4.3 billion from the state budget reserve as well as from federal stimulus grants, the “securitization,” or sale, of future state revenue, and raids on miscellaneous funds are propping up spending in this $37.56 billion budget, which covers 2009-10 and 2010-11.

So the state would emerge from the budget with a $2.5 billion annual hole to be filled. That means the governor and legislature taking office in January 2011 — and charged with writing the 2011-12 state budget — must plug that gap.

“We postpone the difficult decisions yet again, hoping against hope that there’s going to be some kind of miraculous turnaround,” Rep. William A. Hamzy, R-Plymouth, said. “If anyone thinks we’ve solved this economic crisis with this budget bill … you’re kidding yourself.”

These limited revenue sources “are filling cavernous holes in our budget, largely to keep spending at current levels,” said Sen. Michael A. McLachlan, R-Danbury. Spending in the first year of the two-year budget drops just 1 percent from the 2008-09 fiscal year.

“We’re just kicking the can down the road,” he added. “State government cannot survive operating the way it does.”

As Connecticut struggles to climb out of a global recession, analysts agree that the state faces its largest projected deficit in history. They project state finances will run $8.56 billion in the red over this fiscal year and next combined based on current revenue trends.

The budget bill lawmakers sent to Rell early today raises at least an extra $1.25 billion over two years from taxes and fees. That tax hike could reach $1.65 billion if a conditional sales tax reduction isn’t implemented.

The measure also cuts more than $3 billion over two years from spending needed to maintain programs at current levels.

But the biggest tool used to prop up the budget involves revenue that won’t be available two years down the road, including:

•$1.38 billion from the state budget reserve, or Rainy Day Fund.

•$1.47 billion in emergency federal stimulus.

•$1.3 billion to be raised in 2011 as a one-time lump-sum payment in exchange for the sale, or securitization, of future state revenue.

•$102.5 million from miscellaneous funds.

•$60 million from the sale of state assets.

Those “one-shots” total $4.3 billion over two years, and include $2.3 billion in the second year of the budget, 2010-11. And once that two-year period is over, the state also would be out $170 million per year for the next decade. That’s because fiscal analysts estimate the state would have to sell the rights to $170 million per year of its revenue for a decade in order to raise a $1.3 billion now.

Add that $170 million to the $2.3 billion in one-time revenue used in 2010-11, and the state is looking at a $2.5 billion annual hole waiting to be filled in two years — without the help of a budget reserve or emergency federal stimulus.

Democrats control two-thirds of both the House and the Senate. And while nearly all backed the budget, a few opposed it.

Rep. Shawn T. Johnston, D-Thompson, said that by failing to shrink government, the legislature is leaving a massive bill — far larger than the new tax hikes — that comes due in just two years.

“We’re digging ourselves a hole that we’re not going to be able to climb out of,” he said. “Some of the very programs we are afraid to cut today we put in jeopardy in future years by not being able to get our expenses under control.”