The Wrong Way to Budget


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We want our public sector to be able to pay its bills on time, have sound, stable, and predictable budgeting practices, and be a sound steward of taxpayers’ funds. Fiscal responsibility and good, sound bookkeeping provide stability, building voter and business confidence.

For progressives, fiscal responsibility is even more important. We believe in a government that has the capacity to provide strong, effective public services, build infrastructure, support working families, create opportunity, and promote equitable economic growth. Many of these priorities require considerable amounts of money, and a government that can pay for them. Running up deficits, accumulating debt, or using accounting tricks or fiscal gimmicks to pay for public services or critical investments is a terrible idea because it means that none of those programs that we cherish and advocate for are sustainable.

In practical terms, this means that progressives welcome measures that promote fiscal responsibility because sound budget rules are a requirement to sustain our agenda. We might disagree with moderates and conservatives on spending levels and priorities, but we do not want to pretend gravity does not matter. Budget rules and guardrails, then, can be excellent tools to ensure lawmakers do not get ahead of themselves with careless spending or irresponsible tax cuts.

Not all fiscal guardrails, however, are made equal, and unfortunately for Connecticut, our budget rules have some serious design flaws.

For years, Connecticut had struggled to balance its budgets, the result of decades of irresponsible fiscal policies and the slow economic recovery following the 2008 financial crisis. It took years of painful reforms and tax increases under Governor Malloy to fix the problem.

The current set of budget guidelines (a revenue cap, spending cap, and a bond cap) were designed in 2017, the result of a bipartisan budget agreement. Republicans demanded the creation of a set of stringent fiscal guardrails, tying the hands of future legislators with tight limits on spending, revenues, and bonding. To further strengthen these rules, lawmakers included them in bond covenants the following year, making them all but impossible to change.

These budget rules, however, have a serious flaw: they are incredibly restrictive, placing hard caps on how much money lawmakers can raise and spend any given year. Spending limits are defined by the previous year’s spending, plus a small percentage based on inflation or economic growth. Legislators can only spend a fixed percentage of revenue coming in, with any excess funds diverted to the budget reserve fund.

Many advocates and budget experts warned the budget caps were too restrictive when the rules were first adopted. Fast forward to 2024, and these experts were proven right. The guardrails were already restrictive during normal times, but the sudden stop of the economy during COVID and the quick pace of recovery have brought us to a scenario where lawmakers have to cut spending, despite the sustained, massive budget surpluses of recent years. Even though there is a growing consensus that we need to invest more in opportunity, infrastructure, and healthcare, the Governor’s budget proposal includes significant cuts and flat funding to higher education and social services. Instead of providing a tidy set of rules to encourage legislators to tax and spend responsibly, the fiscal guardrails have left them with no room to maneuver, imposing austerity measures regardless of economic conditions or human need in our state.

This is a problem, because we need those investments so everyone can thrive. Connecticut remains one of the most unequal states in the country. Working families are facing rising housing costs. Going to college is becoming more expensive. Many schools are struggling to serve their students. We desperately need to invest more in public transportation, economic opportunity, early childhood, and healthcare. This year, the legislature should be debating which issues should be our priority and how to pay for these needed investments. Instead, they are forced to shuffle funds around, tinkering around the edges, to try and avoid more budget cuts. It makes no sense.

Connecticut needs a responsible, sane, rational budget, anchored by strong, well-designed fiscal guidelines. Instead, we have a fiscal straitjacket that has made it all but impossible to make effective decisions on how we want to spend our tax dollars. We need to fix the fiscal guardrails now.