Yesterday, the Fiscal Policy Center at Connecticut Voices released a report, A Gambler’s Budget, criticizing the new state budget’s reliance on one-time revenues and borrowing. Reliance on these one-time fixes is projected to leave the state facing a deficit of over $700 million in 2016, with only a fraction of that saved in the Rainy Day Fund. Should the economy fail to grow as robustly as predicted over the next three to five years, the deficit will grow and the state will have little choice but to make deep cuts or levy new taxes.
This may never come to pass. The economy may grow for the next five years and produce large surpluses—we hope it does. But if it does not—and a downturn over the next few years is quite possible —Connecticut should be prepared. A central tenet of responsible budgeting, whether for a family, business, or state, is to prepare for a rainy day, even if it is unlikely.
That is where the recently passed budget falls short. Our leaders decided to run more risk in order to avoid hard decisions about how to square revenues and expenses. It is a natural response. No one wants to tell voters they are going to have to accept either fewer services or higher taxes—and it is one Connecticut has made over and over, under Republican and Democratic governors. However, it puts at risk funding for services children depend on and injects uncertainty into the tax code. When will our hair-trigger budget require more service cuts or tax hikes?
More than that, this budget perpetuates a structural deficit that costs Connecticut dearly. We suffer recessions more deeply because we do not build up sufficient reserves to buffer them, and now, the state is borrowing $750 million, accompanied by $218 million in interest, to have more cash on hand so we can pay our bills without having to dip into pension funds. Why can’t we save that money on our own? Loans from the bank are an expensive way to refill your checking account. Connecticut should budget honestly to reduce these costs and make clear to citizens what the state’s real financial picture is so that we can all chip in and keep our collective house in order.