"Gentlemen, we have run out of money. Now we shall have to think."
That remark is attributed to Winston Churchill during the Great Depression, but strikes a chord in Connecticut today. The state's finances in the lingering drag of the Great Recession are badly strained. Well, crisis can be opportunity. We need to think. The old tricks are played out. We need some new ideas.
Officials announced last week that the state faces a $365 million projected deficit for this fiscal year and an estimated shortfall of $1.1 billion in 2013-14.
Unless Gov. Dannel P. Malloy and the General Assembly can pull the plane out of the dive, the state could face deficits close to $1 billion in 2015 and 2016.
It Will Get Worse
Having raised taxes by $1.5 billion last year as part of an effort to close the $3.2 billion deficit he inherited, Mr. Malloy is trying mightily to get through this crisis without raising taxes.
On Wednesday he announced about $170 million in cuts (the governor can cut up to 5 percent from each line item; the legislature must approve additional reductions). These "recisions" hit everything from arts and veterans benefits to higher education, food stamps and environmental protection, and are guaranteed to make a lot of people angry.
And this is the easy part. The legislature soon will have to find another $200 million in cuts to balance this year's budget and then, barring a miraculous recovery in the national economy, plug the big hole in the biennial budget Mr. Malloy must present in February.
He has said there will be no employee layoffs. The state workforce is down by 3,700, more than 12 percent, since 2008.
And although Malloy spokesman Roy Occhiogrosso said there are no plans to ask state employee unions for more concessions, union leaders might want to note which way the wind is blowing. Some critics are calling for an end to binding arbitration and collective bargaining. Unions could make more friends by giving up certain pension- and payroll-padding excesses such as overtime in pension formulas, "step" salary increases and longevity payments.
Poverty Is Expensive
These may be a political bridge too far, but now is the time to put such ideas on the table. For example, what about a concerted attack on urban poverty? How would this help the budget?
State Office of Policy and Management Secretary Benjamin Barnes issued a report Tuesday explaining the budget situation in depth (http://1.usa.gov/VeDF1N). To study this is to see that much of the cost of state government can be traced to the poverty and unemployment in most of our large cities. For example, a main reason for the current year's shortfall is increased demand for Medicaid services. Much of that is coming from low-income adults. Many of these folks live in large cities.
Also, the hugely expensive corrections, criminal justice and social services bureaucracies are there in large part because we have allowed the cities to become so poor. We have traditionally paid heavily for the consequences of this policy and not much to prevent it. Mr. Barnes said in a presentation this week that policy change is needed. Here would be a place to start.
Hartford's unemployment rate of 15.7 percent is far and away the highest in the state. Wouldn't it be cheaper and more productive to pay able-bodied residents to clean parks, rebuild infrastructure and make things we need than continue to do what we are now doing?
Mr. Malloy has a tough job, and he's wisely talking to Republicans as well as Democrats to look for answers. He should go further; to businesses, universities, mayors, planners. We all need to think.
Reprinted with permission of the Hartford Courant.
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