On Wednesday, January 24th, Ellen Shemitz, Executive Director at Connecticut Voices for Children, testified in front of the Commission on Fiscal Stability and Economic Growth, urging support for strategic investments that will spur growth in the state economy, create a prepared workforce, and fuel a competitive business environment.

Shemitz urged the Commission to reject an austerity approach to the state budget deficit, explaining that further cuts to critical services and delays to infrastructure repairs would undermine fiscal stability and impede the state’s ability to compete with its neighbors. She stated: “Only by investing in more inclusive and shared prosperity can we ensure stronger and more sustainable economic growth.”

Over the last few weeks, the Commission has discussed the possible causes of Connecticut's fiscal crisis, looking for a way forward. In her presentation, Shemitz laid out the three main causes of the persistent budget deficits: slow economic growth, an outdated tax system, and growing fixed costs. To solve the crisis, she called for an Opportunity Agenda that would prioritize inclusive economic growth, child and family well-being, and equity and excellence in education.

Connecticut´s economic recovery after the Great Recession has been unusually slow, with job growth trailing behind most of the nation and economic output only recently returning to pre-2008 levels. 

Slow economic growth is only part of the problem. Connecticut´s tax system is in many ways outdated, failing to keep up with the pace of changes in the economy. Shemitz highlighted the need for changes across sales, business, and property taxes to assure adequate state revenue and to improve tax equity.

Finally, the growth of fixed costs has crowded out other spending, with non-functional costs (pension contributions for state workers and teachers, health care and pensions for retirees, and debt service) now constituting a larger share of the budget than services for children and families (including education, healthcare, and early childhood).

While the steep rise in fixed costs results from decades of financial mismanagement, the full impact is only now being felt. Connecticut Voices for Children in concert with students from the Yale Law School Legislative Clinic have created financial models to show that existing sources of revenue simply cannot meet the entirety of the state’s obligations. Or as Shemitz pointed out, “Connecticut cannot cut its way out of this crisis. The only path forward is to grow the economy: to grow our way to fiscal health.”  

Shemitz called upon the Commission to recommend changes to recently enacted fiscal constraints that she warned would prevent strategic investments in state infrastructure, public education, and core city revitalization. She urged the Commission to recommend repeal of new legislation concerning bond covenants: a so-called bond lock that takes budgetary and legislative power away from the state’s elected representatives and gives it to Wall Street. “We need to use all of the available tools possible to prioritize inclusive economic growth and open the doors of opportunity," said Shemitz.

You can watch the full presentation below. The slides are available here.