This overview of Connecticut’s state budget spending cap, considered to be one of the more restrictive in the nation, finds that that cap’s definition of personal income growth assures that as the economy recovers from a recession, allowable state spending will always lag growth in the economy. The cap’s budget base definition assures that spending cuts made in a recession will irrevocably reduce the budget base for subsequent years. Together, the definitions ensure that public investment will ratchet down as a share of the economy with each successive recession and, thereby, over time jeopardize our continued competitiveness and quality of life.
Recommendations for reforming the cap to assure a closer fit between growth in state spending and growth in the economy include:
- Re-defining “growth in personal income” to use a more current and comprehensive measure of personal income growth;
- Re-defining “general budget expenditures” as the amount of spending allowed under the cap or, minimally, the total amount actually spent in a given year, including surplus funds and transferred lapse funds used for on-going purposes;
- Excluding the first year of new federal funds from the cap, but then adding them to the budget base.
