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Opinion: Realistic CT budget must address fixed costs, sales tax reform

Ned Lamont. (CT Mirror)

My fellow residents, friends and neighbors,

First, thanks for allowing me the opportunity to govern this great state. It doesn’t matter to me for whom you voted in November. From the day I was elected, I began focusing on governing the best way I know how – transparently, openly, and in a way that encourages debate, dialogue and discussion on all sides of an issue. That’s why it’s important that you hear from me directly about my vision for Connecticut’s future and how it shapes the budget that I will be submitting to the legislature in just over a week.

I believe our state is poised for success, with new jobs on the rise, unemployment rates at historic lows, and the growth of established and emerging sectors from wind energy to biotechnology on the horizon. I also believe that delivering on those opportunities requires a sustained commitment to fiscal stability that will allow Connecticut to turn the page on what’s been holding it back and give you, your employers, and your local governments the confidence you need to thrive.

We are expected to end the fiscal year with a surplus. While that sounds like great news, I ask you to temper your enthusiasm for a few reasons.

  • First, our economy has still not fully recovered from the Great Recession more than a decade ago, and we must be prepared for the possibility of another economic downturn.
  • Second, we cannot allow the fact that we are expecting a surplus and the likelihood of a significant deposit to the Rainy Day Fund lull us into a false sense of security and sap the urgency we need to confront our fiscal crisis head-on. In fact, a significant portion of the anticipated surplus must, as required by the recently enacted volatility cap, be deposited to the Rainy Day Fund and therefore cannot be used to address the budget gap. Although we could use that surplus to balance next year’s budget, our fixed costs – the true culprits behind our continued deficits – are growing by hundreds of millions of dollars per year. That growth eats into our ability to make much-needed investments in our future- things like a 21st century transportation system, education and workforce and economic development.

These fixed costs are not something that we can simply cut, as they are contractual obligations, similar to your mortgage or credit card debt. So where do we go from here?

In my proposed budget, I’ll suggest a path forward to finally address those fixed costs and reduce the rate of increase. I’ll also hold the line on the operating budget, while increasing investments in technology which, over time, will streamline our citizens’ interface with state government and produce real long-term savings. These savings won’t happen overnight, but we can’t continue to put off to tomorrow what we should have begun a decade ago. People expect an Amazon Prime experience and our state government’s capabilities, namely its technology, simply aren’t there.

In terms of revenue, the sales tax used to be the revenue workhorse, supporting most of our state’s budget. But today, the sales tax is not applied to the fastest growing sectors of our economy including the digital and service economy. If you go to a store to buy a DVD, you pay sales tax. But if you download that same DVD from a streaming service, you don’t. What sense does that make? There are many similar examples in our state’s current sales tax exemptions list and we need to streamline our system and ensure fundamental fairness. Next week, I plan to start a discussion with the legislature about how we can reform the sales tax without raising rates.

My job on February 20 is to share with you a realistic and thoughtful budget that will jumpstart the Connecticut economy, and work for everyone – leaving no one behind. But my proposal is just the beginning of the conversation – not the end. I look forward to sitting down with your legislative representatives, with our friends in labor and business, and with other stakeholders, as we push toward an honestly balanced budget – which we will pass in the light of day and before the end of the legislative session in June.

Our budget will be posted online, and I encourage you to take a look and share your thoughts with my office via email or social media. Over the coming weeks and months, I, the Lieutenant Governor and key commissioners will also be travelling around the state to talk to you in person about my proposal. We need to hear from you, and so do your legislative representatives. It’s my job to make sure that you understand the tenuous reality that we face, as well as the cost of doing nothing at such a critical juncture. But it’s also my job to make sure we work together to pass a budget that represents and supports the values we hold dear. Let’s work together and make our state the place we know it can be.

Teddy Roosevelt once said “Far and away the best prize that life offers is the chance to work hard at work worth doing.” This is hard work. But it’s worth it. I look forward to doing it with you.

 

Ned Lamont

Governor, State of Connecticut

4 comments

Bryan Meek February 12, 2019 at 9:37 am

A 5% across the board sales tax on everything except food and medicine would generate $3 billion in revenue. There will be a lot of tax exempt entities screaming about this. But what could be more fair?

Piberman February 12, 2019 at 10:04 am

Some 3 months after election we’re all waiting for Gov. Lamont to announce his “plan” to create a viable CT ending the Exodus of our most able citizens. So far we have taxes on groceries and tolls. And CT’s public Unions say they’re confident their contracts are secure.

So we know our future under Gov. Lamont. After 3 months Gov. Lamont remains “undecided” how to solve to CT’s long standing problems. But he’s confident CT Democrats will restore CT. Honey call the movers.

Gov. Malloy is looking better in the rear view mirror. At least he had the good sense not to propose taking groceries – a tax that falls on the lower incomes.

Al Bore February 12, 2019 at 10:42 am

What do we do about the states high salaries, pensions, and benefits that are so out of control compared to corporate america. Until we get that under control we will continue down the same path that we have been for many years, it can no longer be sustained.

alan February 12, 2019 at 12:17 pm

Malloy’s failures are catching up to us quickly. All his gimmicks and the way he “kicked the can down the road” after promising not to…this state is in very real trouble.
Good luck to Ned! With the problems that Danny left and this current legislature he is playing against a stacked deck!

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