Yankee Institute Statement on the 2019 Budget

“We applaud Gov. Ned Lamont and the legislature on passage of a budget that does not contain a new capital gains or an income tax rate increase; does not force municipalities to pay for teacher pensions they could not control; removes a far-fetched provision for real-time sales tax collection; and bolsters Connecticut’s Rainy Day Fund. The implicit acknowledgments that higher taxes on the wealthy will force even more of our state’s affluent residents to relocate — and that increasing property taxes by forcing municipalities to pay for teacher pensions will hurt Connecticut residents — marks an important change from previous administrations. 

However, several components of the newly-passed budget should be of enormous concern to all the people of our state. First, the budget deal passed in the House of Representatives today saddles Connecticut’s small businesses with a massive burden through the imposition of a paid family and medical leave plan and a reduction to the pass-through entity tax credit. Small business is the engine of any economy and these provisions – combined with the $15 minimum wage passed earlier this session – will hurt the very businesses and workers we need for our state to thrive. Our government should be helping businesses grow, not increasing their costs and raising their taxes.

Second, the budget underfunds the Special Transportation Fund by diverting vehicle sales tax revenue to the General Fund. Rather than honoring the state’s commitment to fund transportation, this willful diversion of public funds and resources will undoubtedly be used to push for tolling legislation during a special session — an effort to tax Connecticut drivers for the failures of the legislature. Creating a crisis to justify the imposition of unpopular and unnecessary measures is an offensive way to conduct public policy; a new tolling regime would surely hurt residents and businesses, making Connecticut less affordable and forcing more people and businesses out of the state.

Third, the Teachers Retirement System represents one of the greatest threats to Connecticut’s fiscal stability, with costs threating to grow to between $3 and $6 billion per year. We recognize that Connecticut’s dire position leaves Gov. Lamont with little choice but to pursue re-amortization of unfunded teacher pension liabilities. The transfer of revenue from the CT Lottery Corp. may also be a marginally useful innovation, but if Connecticut is going further saddle future generations with this debt, it must also reform teachers’ retirements to meet reality. This includes switching to defined contribution plans for new hires, allowing teachers to pay into and collection social security and increasing the pension contribution rate for those already enrolled in the pension system. It has worked in other states and it can work here.

Finally, it is deeply disheartening that Gov. Ned Lamont has broken his campaign pledge to seek significant reforms to state employee pensions and benefits. Until those running the government in Hartford can find a way to right-size its relationship with public-sector unions — which represent the biggest and most powerful special interest group in Connecticut – our state will continue to straggle down the road of fiscal insolvency as taxpayers suffer. The passage of numerous, expensive union contracts this session is ample evidence of the stranglehold government unions have on the legislature; even as Connecticut faces continuing deficits, it continues to award massive pay raises to unionized employees while the private sector struggles in a stagnant economy.

These issues need to be addressed in a way that is fair and equitable for all parties, including the taxpayers and businesses who, year after year, have paid the price for Connecticut’s fiscal mismanagement through serial tax increases, increasingly burdensome state regulation and a continuing failure to address the government unions’ unchecked privilege in our state.As always, Yankee Institute stands ready to help and work with any lawmaker of any political party to find solutions that benefit the people of Connecticut.”

Statement attributable to Carol Platt Liebau, President of Yankee Institute for Public Policy