Connecticut would have $5.2 billion more in its rainy day fund if lawmakers had kept spending under the state’s constitutional spending cap, according to a new Yankee Institute policy brief.
The Yankee Institute is urging Gov. Malloy and state legislators to honor the cap in the next two-year budget, which will be released in February.
“This budget needs to be the first step toward a sustainable government and fairness for taxpayers. Lawmakers can accomplish these goals by getting state spending under control,” said Carol Platt Liebau, president of the Yankee Institute. “The spending cap is an important – and popular – feature of our government. A good government needs boundaries”
The spending cap was implemented in 1991, the same year the state adopted an income tax. Since 1991, state spending has nearly doubled while Connecticut’s population has only gone up 10 percent.
“Our research shows that if the state had adhered to the spending cap, we could have had a substantial rainy day fund in place before the start of the 2008 recession,” said Suzanne Bates, Yankee Institute’s policy director and author of the study. “Because we didn’t save when we had the chance, we were unprepared when financial disaster hit.”
Instead of slowing the growth of state government expenditures, lawmakers implemented a tax hike in 2011 that slowed the state’s recovery from the recession. Economic growth in Connecticut has lagged the national rate every year since 2008.
Now the state is facing deficits of $1.3 billion and $1.4 billion for fiscal years 2016 and 2017. Lawmakers need to close these gaps by cutting the cost of state government, instead of further burdening Connecticut’s citizens.
The recent mid-year cuts to state government show that last-minute decisions leave us with fewer options. The responsible approach is to make structural changes to prevent future cuts from hurting those most in need.
The spending cap policy brief is the first in a new series of policy briefs that the Yankee Institute will publish in order to address the ways Connecticut can get its economy moving again so every resident has an open road to opportunity.