Good afternoon, Chairpersons, Ranking Members, and Members of the Finance Committee. My name is Carol Platt Liebau. I am the president of Yankee Institute — the eyes, ears and voice of hardworking people who want a prosperous Connecticut. I am here to testify in opposition to elements of SB 1246, the governor’s budget bill.
One of Yankee Institute’s primary objections centers on the budget’s reclassification of $300 million dollars in revenue. Originally subject to the volatility cap — a critical component of Connecticut’s fiscal guardrails — this revenue would be reclassified so that, poof! it’s no longer constrained by those limits.
There has been no explanation as to why $300 million is the precise amount deemed “non-volatile.” Is there data supporting this specific figure? Or is $300 million simply the amount needed to fund certain programs?
Certainly, the guardrails impose spending limits that are restrictive. But that’s their purpose — to serve as a long-term safeguard against overspending. If we can simply reclassify money and move it out from under the volatility cap whenever we want it, then the guardrails aren’t really guardrails. They’re mere “guard suggestions” that will be violated again and again.
Leaders on this committee are known for their clear-eyed vision when it comes to fiscal realities. Senator Fonfara played a pivotal role in crafting and passing the fiscal guardrails. As he rightly foresaw, these measures would improve Connecticut’s financial stability and credit ratings while protecting taxpayers from future tax increases. But we cannot forget why the fiscal guardrails were necessary. We all remember the pre-2017 financial crises that resulted from over-reliance on volatile revenue (especially capital gains taxes), which led to budget deficits, unstable funding, and serial tax increases. The guardrails were designed to prevent this cycle from continuing, by directing unpredictable revenues into the Budget Reserve Fund (BRF).
In the past, a lack of fiscal discipline led to significant pension debt and credit downgrades for Connecticut. Since then, we’ve made progress — improving our pension funding from the third worst in the nation to the sixth worst. Let’s continue moving forward and avoid repeating the mistakes that set us back.
To be clear, the governor’s budget has many commendable features. It extends the bond lock to 2038. It reduces the film tax credit. It provides property tax relief for Connecticut residents. And it eliminates some occupational licensing fees to encourage small business growth and reduce employment barriers.
Undermining the protections of the fiscal guardrails would be a mistake. They allow families to stay together in Connecticut without fearing future tax hikes or drastic cuts to essential services. They provide the fiscal stability and predictability that let our businesses innovate and thrive.
We respectfully ask that you respect the bipartisan agreement that was forged in 2017 — and then unanimously affirmed just two years ago — and do not circumnavigate the volatility cap, along with the rest of Connecticut’s fiscal guardrails.
Thank you.
Respectfully submitted,
Carol Platt Liebau
President, Yankee Institute
