As a principle, we want our state to have a responsible budget. That is, we want it to be able to pay its bills on time as a functioning, efficient, and effective government. This fiscal probity, however, is only part of the story; a responsible budget should also include the investments we need in programs and services to ensure that Connecticut families will thrive and prosper. This means funding for good schools, public transportation, healthcare, and housing. It means childcare, early care and education, affordable colleges and universities, and building vibrant, welcoming communities across the state. We cannot just “pay our bills”; we must be willing to make the investments working families need to thrive.
True fiscal responsibility also requires long-term thinking. Government revenues and spending rise and fall with the overall economy, and policymakers must account for these fluctuations. In Connecticut, as in many other states, this is achieved through a budget reserve fund where money is set aside during boom years and drawn upon during lean years. We all remember the “state of permanent fiscal crisis” of years past. It makes sense, then, to have some budget rules and guidelines to avoid repeating the mistakes that led us there.
In pursuit of fiscal restraint, Connecticut created a set of “fiscal guardrails”. Sounds good, right? These guardrails, unfortunately, are restrictive to the point of blocking any new spending, and so inflexible that they have removed much of the budget authority legislators might have, taking away the state’s ability to invest in infrastructure and public services.
Since 2017, Connecticut has had three interlocking budget restrictions: a spending cap, which sets a maximum growth rate for expenditures; a revenue cap, which mandates a built-in surplus; and a volatility cap, which forces lawmakers to allocate a significant portion of income tax revenues directly to the reserve fund. The spending cap, which has been written into the state constitution since 1992, requires a three-fifths supermajority in both chambers to lift it. Additionally, contracts with Wall Street investors in state-issued bonds essentially prohibit lawmakers from amending any of these rules.
A bigger issue, however, is that these restrictions severely limit the state’s ability to fund public services, to the point of mandating budget cuts despite economic growth and massive surpluses. Currently, Connecticut is projected to end the fiscal year with a staggering $1.6 billion surplus. Yet, due to the restrictive spending cap, the Lamont administration must cut spending by nearly $400 million.
As a result, Connecticut has a growing economy, a maxed-out rainy day fund ($4.1 billion), and a surplus so large that hundreds of millions of dollars are being used to pay down pension liabilities ahead of schedule. Despite all this, the state is implementing hiring freezes, cutting funding for higher education, and delaying critical projects and investments. These cuts are not the result of deliberate policy choices or a lack of funds but are instead driven by inflexible budget rules enacted seven years ago.
Now, I have lived in Connecticut long enough to know that the legislature sometimes does things that do not make much sense. Although I would loudly protest and disagree, I’d mostly be fine if a hypothetical Republican or conservative majority decided that what our state needs is big spending cuts and some harsh austerity measures. That would be bad policy because we need to make investments in education, housing, healthcare, and many other areas to support working families, reduce economic disparities, and grow our economy. But it would be an honest policy decision: a majority of legislators believe in a smaller government, and in a democracy, the majority decides.
What we have now, however, is significantly different. Democrats have veto-proof supermajorities in both chambers of the legislature. They believe that Connecticut working families need good, well-funded public services — good schools, health insurance, transportation, public safety, nice parks, and good colleges. They favor programs that support working families, from a strong Earned Income Tax Credit to affordable childcare. They know a responsible budget, one that puts working families first, should include these programs, fully funded, to build a Connecticut for the many, not the few. Yet, due to misguided, clumsy, overly restrictive budget rules passed seven years ago, they are legally obligated to cut public spending and dismantle public services.
It is not just that austerity measures make little sense and are bad policy; it is that these austerity measures are not even something that voters or legislators actually want. We are ruled by the ghosts of legislators past, cursing us with dumb policy decisions.
Come January, once the legislative session starts, the first priority of the legislature should be finding a way to fix the budget guardrails in a responsible, effective manner. Connecticut does need some sensible, well-designed rules in place to ensure that budgets are balanced over the long term, building up reserves in good years and drawing them down during recessions. These rules, however, must be flexible enough that policymakers can decide and implement their vision for the state, raising the necessary revenue and appropriations. Last but not least, they will also have to account for the predictable decline in federal revenue under the new administration, not just the end of stimulus funds, just to maintain current services.
A responsible budget is one that both spends within our means and spends wisely. The current budget rules mistake austerity for rectitude, while taking away any fiscal authority from voters or policymakers. It’s time to fix the budget guardrails and ensure Connecticut can make the investments working families need.