Connecticut one of seven states with spending over pre-recession levels

August 12, 2011

By David Godow

Despite the strong push for fiscal austerity sweeping through state budgets this year, Connecticut has managed to increase spending above 2008 levels, according to a study by the Center on Budget and Policy Priorities (CBPP), a D.C.-based think tank. Meanwhile, out of 44 states for which data is available, 37 plan to spend less on services than they did four years ago.

Connecticut's ability to maintain spending levels in the face of weak economic growth and cuts in federal aid comes from a combination of spending cuts and tax increases. Governor Dan Malloy and his supporters have masterminded a plan that will raise taxes by $1.5 billion in the coming fiscal year, but are struggling to implement the spending cut side of the equation. Malloy's cuts would come at the expense of the state's public employee unions, who have repeatedly refused to accept revocation of some of their collective bargaining rights and some cuts in their benefits.

CBPP makes note of two other states that have maintained or slightly increased spending levels through tax hikes; Hawaii raised $600 million in new revenue in its 2011 session by limiting tax exemptions for businesses, eliminating the standard income tax deduction, and capping itemized deductions for high earners. Additionally, Nevada extended $620 million in "temporary" taxes that had been scheduled to expire this year.

By contrast, CBPP reports, 12 states actually enacted large tax cuts, despite their weak finances. Many of these cuts are actually fiscal stimulus efforts, such as tax credits or deductions to incentivize hiring and investment by private companies. CBPP's formulation counts the expiration of temporary tax hikes from previous years as "tax cuts."

Whether Connecticut will be able to follow through on its promise to balance spending cuts and tax hikes is still an open question. Unions rejected Malloy's proposal in June, but have been asked to approve essentially the same deal -- with several small concessions from Malloy's team -- by August 18. Meanwhile, the state's nonpartisan Office of Fiscal Analysis (OFA) announced this week it could not account for at least 40% of the savings Malloy's union cuts promise. According to the OFA, the proposal as written simply does not include enough information to make sense of the governor's promises.

If Malloy's deal fails to close the gap, additional cuts in Connecticut's $40.1 billion biennial budget will likely be needed, complicating Hartford's increasingly frantic efforts to preserve state services.

See also

• Connecticut public employee unions asked to swallow same cuts again
• Connecticut public employee unions struggle to fend off fiscal austerity
• Dan Malloy