Dannel Malloy, Connecticut’s Democratic and Working Families Party Governor, told citizens of his state last year that the highest tax increase in the history of Connecticut, including a retroactive state income tax hike, would balance his state’s budget. It appears he was wrong. Bloomberg has reported that Connecticut will have a $94.9 million revenue shortfall in fiscal year 2012. In addition, official estimates indicate that the state’s revenues will trail by $139 million in fiscal year 2013.
Minimizing the significance of the shortfall, Gov. Malloy said in a press release:
All today’s announcement means is that, as is the case in other states with high wage earners, fourth quarter revenue is coming up short of expectations. That’s why today, I’ve instructed Secretary Barnes to pare back on current year expenses. But let there be no confusion – we will end the current fiscal year in the black, and in a more stable fashion than this state has seen in many years.
Blaming the shortfall on the “uncertainty surrounding the extension of the Bush-era tax cuts,” Mr. Malloy said that such “uncertainty at the federal level” resulted in taxpayers’ shift of capital gains and income, as well as declines in bonus levels in the financial service industry.
Last year, Gov. Malloy used the tax hike to balance his state’s budget against a public sector union concession package that actually required few concessions of unions: no layoffs for four years and no furloughs; wages frozen for two years, then followed by three annual 3 percent raises; retirement age raised by only two years, and not until after 2022; and minor changes in health benefits such as mandatory annual physician visits and mail-order prescription plans.
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Regarding the budget shortfall, State Senate Minority Leader John McKinney (R-Fairfield) said, “When the largest tax increase in state history isn’t enough to pay the bills, I hope everyone can agree that a significant reduction in the size and cost of government is in order.”
However, House Minority Leader Lawrence Cafero (R-Norwalk) noted that the governor’s commitments to the state unions will likely tie the state’s hands in making significant and meaningful spending cuts. “That is a very, very bad situation to be in when you have an unstable fiscal environment,” Rep. Cafero said.
According to the most recent Quinnipiac University poll, performed in September of 2011, Gov. Malloy has a negative 41 – 48 percent overall job approval rating.
By contrast, 53% of voters in New Jersey, surveyed in a Quinnipiac poll approve of their governor, Republican Chris Christie. Gov. Christie is known for his confrontation of unfunded public sector union mandates in his state and, recently, his proposal of a 10% personal income tax cut for all residents. In his State of the State address on Tuesday, Mr. Christie said that, unlike Democratic governors, like Dannel Malloy of Connecticut and Andrew Cuomo of New York, who pushed through new taxes in the past year, he instead would choose to return money to the taxpayers when New Jersey’s economy improved. “Let others choose tax increases,” Mr. Christie said. “We choose responsible tax cuts to give our overburdened citizens real relief.”
Despite the fact that Gov. Cuomo did, in fact, raise taxes last month on those earning $2 million or more, he has now come out in favor of taking on union pensions. Mr. Cuomo has proposed a $132.5 billion budget that ties an education spending hike to a new teacher-evaluation system and a raise in the retirement age for future public sector workers.
“There is a reform movement all across this nation that is shifting the focus onto the student rather than the industry,” said Gov. Cuomo. “We have to change our thinking from process to results, from the system to the individual, from salaries and pensions for people who work in the system, to the graduation rates and test results from the students.”
In this “tri-state” area of the northeast, it is Gov. Malloy who has insisted on bending over backwards to “fully fund” union mandates on the backs of middle class taxpayers. As predicted, his budget is falling apart and his attempts to “end the fiscal year in the black” will be cosmetic, at best.
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