• What Exactly Are The Connecticut “Fiscal Guardrails?”

    February 17, 2024
    Hartford Capitol, Public Domain.

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    For a number of years, Connecticut taxpayers have heard many statements out of the mouths of politicians and in the media about “fiscal guardrails.” This buzz-phrase had its origins during the 2017 state budget negotiations and ever since has been trumpeted as a security system of sorts against fiscal recklessness and insanity in the State of Connecticut. However, since the onset of the 2024 Legislative session, this term has been used increasingly as a term equivalent to a gold standard of ensuring against fiscal ruin. To this end, I have felt it incumbent upon myself to strip the concepts to bare metal and describe what the Connecticut “fiscal guardrails” really mean, and as to if the basis they have is rooted in actuality.

    To understand what the guardrails are is an amazing look at the creative “funny money" accounting of Connecticut's government going all the way back to 1991. Unbelievably, a "spending cap" was enacted as part of the agreement to give Connecticut a State Income Tax in 1991. That "spending cap" was summarily ignored by careless feel-good legislators on both sides until said cap was rebranded as the "fiscal guardrails" in 2017 as the state was entangled in excessive spending, borrowing, bonding and ignoring all of its long-term unfunded liabilities, including (but not limited to) the bulbous state pensions paid to retired state employees and state legislators (with many checks sent to low/no tax states where these people now live).

    Therefore, rather than dealing with sharp fiscal controls, expense reduction, and eliminating the waste, fraud, abuse, and oppressive administrative state redundancy in Connecticut, these "fiscal guardrails" were instituted to accomplish a mere three restraints on spending, being, a spending cap of a base percentage tied to the inflation rate, a volatility cap that forces excess revenue from variable revenue sources to go first to the budget reserve and then to underfunded pensions, and a revenue cap that limits state spending in order to create the illusion of a surplus. Trying to understand these "fiscal guardrails" since 2017 is a colossal study of a vague theory never quite catching up with the reality of the fiscal wreckage and spending horror that, unfortunately, is the Nutmeg State.

    To make the weakened “fiscal guardrails” concept example even more clear, let us take a step back to reflect on basic fiscal realities. In 1991, the Connecticut State Budget was $7.7 billion dollars. In 2024 Connecticut is sporting a $26 billion dollar budget. That is a 335% increase in state spending. Adjusting that figure for inflation, we see that it has increased roughly 135%.

    In that same period, Connecticut's population has stagnated by increasing between only 5% and 9%, depending on what you read and or believe, and state GDP has cratered with rampant business departures and the loss of professional and high paying occupations. Thus, state spending has accelerated to an incredible level with little increase in its population. And Connecticut proudly boasts one of the highest property tax rates in the country, in addition to one of the highest state rates in the country, while being a constant bottom five state in business categories in one of the most business-unfriendly and avoided states in the union.

    Also, Connecticut has $100 to $150 billion dollars in short- and long-term debt, along with unfunded liabilities (such as the state pension fund). Contrary to the rhetoric of King Ned Lamont (aka “the Unaccountable”), his Democrat Party, and his state-run media spokespeople, legal and productive citizens and new businesses are not flocking to the state, nor have they been coming in since 1991, going all the way back to the enactment of the first state income tax.

    In 2024 like past years, cries from liberal sources spew their hatred against all "fiscal guardrails", as incomplete as they may be. From liberal/socialist Democrat State Representatives and State Senators, to the insatiable SEBAC-state government union groups, to the money that is never spent on children and for the perpetual deficit of state higher education, we will hear the shrieks of “more spending” is essential for Connecticut to survive! It is borderline miraculous as to how Connecticut has survived since 1991 in overspending and overtaxing its dwindling business and legal citizens for 33 years.

    But where is the improvement of over three decades of reckless spending? One may notice that there is massive crime, a decaying infrastructure, shameful cities, massive state debt, massive taxes, and a migration out of the state even with these minimal "fiscal guardrails" that are a battle cry to Democrat Party socialists who wish to end them. In fact, if more money is the answer to all the problems stated above, then why isn't Connecticut flourishing in 2024? Why has Connecticut now become dependent on tax revenues from public safety and societal hazards, such as legalized gambling of all forms, and now legalized marijuana sales? What is next for the state—legalized taxed prostitution? Legalized heroin?Psychedelic mushrooms?

    I am now of the belief that there is no limit to the lows where this can all go.

    In addition, many wonder how these "fiscal guardrails" are working in the least when the state somehow magically saves $20 billion dollars in 25 years by making payments to its underfunded pension fund. If indeed true, will this $20 billion dollar windfall be used to lower taxes in the state? Or will it just be used to throw more money at failed social programs that do little for the state? Why cannot state government fiscal restraint be the norm as it is for Connecticut families and businesses who are fighting for their economic survival in 2024?

    So, while there may be some partial benefit in the concept of the "fiscal guardrails", said concept is not nearly adequate for the fiscal out of control wreckage that is Connecticut. Real, honest-to-goodness guardrails would be an effort towards consolidation and fiscal transparency while removing the Connecticut cancers of waste, fraud, abuse, and redundancy. Instead, as we stand, the wonders of Connecticut government are akin to placing hard-working legal Connecticut Taxpayers in an ill-equipped electric vehicle gasping down the wrong side of a potholed highway to a slow and painful fiscal death. But The Connecticut Democrat Party cannot wait to rail that any sort of "fiscal guardrail", even limited ones, be dismantled and destroyed for the last time.

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    Bob Swick

    I am an Adjunct Professor of Business and Economics and have taught for 41 years for several different colleges and universities. I have a Bachelors of Science in Journalism and a Masters of Science in Economics. I have written about economics and political issues in my blog "Swick Speak" since 2006.

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