The Connecticut General Assembly is in session, and the budget hearings have begun. With the state facing a deficit north of $570 million in the coming fiscal year, legislators are again scrambling to find ways to balance the budget.
There seems to be very little appetite so far for any kind of tax increases, so Governor Malloy and legislators are talking about cuts - and these cuts are being discussed, right now, at multiple Appropriations Committee hearings at the Capitol. You can find the calendar here; today the committee will hear about higher education. Tomorrow at 4 pm they will host the hearing for human services which may be of most interest to you.
There are two things to bear in mind about the budget revisions proposed by Governor Malloy, one about process, one about where the cuts will fall. Both are important, and deserve some attention.
A. WHERE ARE THE CUTS?
The cuts for fiscal year 2017 add up to $570 million. The departments that are facing the worst cuts are the Department of Social Services ($61 million), Department of Developmental Services ($55 million) and from addiction and mental health services ($71 million).
This by itself would be worrisome, but it goes beyond that. According to the CT Community Nonprofit Alliance´s analysis, 72% of the cuts ($408 million) come from non-profit providers. Consequently, many core services offered by these providers will again face an uphill battle meeting the needs of low-income families in the state with diminishing resources.
The slow economic recovery has left many families behind. The budget is asking them again to bear the brunt of the state fiscal woes.
B. HOW ARE THE CUTS BEING INTRODUCED?
Governor Malloy has decided to consolidate most line items in the budget under a generic "agency operations" heading. After that, his proposal states that spending will be cut 5.75%, but without specifying exactly from where.
This is a problem. Instead of the traditional budget breakdown of proposed reductions with specific explanations of what line items are facing cuts, this proposal just offers an agency-wide spending level, and gives the authority to each agency head to decide where to cut. The result is a budget that imposes harsh spending cuts but is lacking in transparency, with no information on what programs will be eliminated.
This is not acceptable. Transparency is an essential for accountability. The Governor´s budget proposal shifts the responsibility and decision making for crucial spending decisions from an open, public process at the General Assembly towards one with no public participation, no open hearings and limited accountability. The only way to make those decisions and introduce real, needed changes to the state budget is through an open, accountable and transparent budget process, not by delegating authority to the executive branch.
WHAT IS NEXT? HOW CAN I GET INVOLVED?
Right now we encourage you to reach out to your legislators, even more so ifthey are on Appropriations. If you are able, we strongly encourage you to submit testimony to the committee, specially if you are involved in a program that is facing cuts. The message is simple:
Feel free to give us a call if you have questions or need a hand drafting testimony, setting up a meeting with a legislator or preparing talking points. We will be happy to help.
It is finally here - Governor Malloy just presented his budget proposal. We knew it was going to be a tough budget year, so there are plenty of things to talk about and discuss. We have a FESC meeting this Friday, 9.30 to 11,30 am, specifically to go over the whole thing and plan ahead. Make sure to come, and there is a lot to talk about.
On to the budget, then. Let´s start with the basics:
- Text of the Governor´s budget address
- Full budget details
- Slides covering the main points.
- Press release
That said, some very early, very quick takes on the budget:
The deficit is still a bit north of $1 billion. To close the gap, the Governor is relying in a mix of spending cuts ($590 million) and revenue increases (not exactly taxes, but close enough), mostly tax cuts promised for this year that will not happen, some tweaks to the sales tax that will increase revenue and money from a settlement with Standard & Poor´s from the financial crisis.
- No layoffs, but a good deal of attrition in the states labor force; 300 positions, or a 2% workforce reduction in two years.
- Full day kindergarten for all children in the state.
- If you like transportation (and you should) the budget has some very good news; the New Haven-Hartford-Springfield rail line is still on track, and there is quite a lot of investment fixing up Metro North, as well as some road projects. More information here and here.
- Second Chance Society Initiative: some significant changes in criminal justice, including eliminating minimum sentences in some areas, reducing penalties for simple drug possession to misdemeanour and streamlined parole proceedings for non violent offenders.
- The State EITC is not restored to 30% of the federal credit, and remains at 27.5%
- Many important line items remain frozen: municipal aid and ECS funding, for instance, have not seen a nominal increase for the past few budgets, what amounts to a fairly real cut in the past few years.
- Significant program cuts in the department of labor: STRIVE, Jobs Funnel and youth employment, among others, lose more than $5 million in funding.
- The Department of Social Services got hit with big cuts:
- Husky A adults earning above 138% of the Federal Poverty Line will be shifted to Health Access CT, and will have to pay premiums with federal subsidies (a $44.6 million cut).
- The biggest hit, however, was on Medicaid reimbursement rates: $43 million to providers, $5.1 million to low cost hospitals, $4.3 million to ambulance services.
- Healthy Start got zeroed out, among other programs, cutting $8.1 million.
- The overall budget cut looks smaller because they are getting $55 million from new revenue: an update on the Hospital Provider Tax.
- The Office of Early Childhood saw a slew of programs cut, including Help Me Grow, the Community Plans for Early Childhood and Family School Connection (about $2 million)
- Some cuts on higher education: the Uconn block was reduced by $27 million, and Board of Regents saw cuts both on Transform CSCU ($12 million) and their block grant ($4 million). Remedial education pilots and funding are also being cut; we are trying to see exactly by how much.
The budget really does not add up unless one assumes an increase in revenue to appear in the April budget report. It might be there (the economy is actually doing fairly well), but still. We will see.
The Global Post has a lengthy, dense interview with Joseph Stiglitz about inequality. According to the Nobel-prize winning economist, inequality is damaging not just for the poor, but for society as a whole:
Globalization, as it has been managed, has resulted in increased inequality, and as inequality increases, growth becomes weaker. The risk is that the middle class is going to be harder and harder hit, and that there will be prosperity for only the few at the top. But the middle class is important for stable growth and a strong democracy. When a society becomes more and more divided, it becomes increasingly class-driven, and it’s very hard for democratic processes to work well in that kind of society.
Inequality is also self reinforcing, as with wealth comes increased political power. This, in the long term, can damage the economy, as it opens the door to rent-seeking behavior:
America has become a rent-seeking society, a term of opprobrium we usually hear applied to oil-exporting countries. Rent-seekers extract profit from existing industries without contributing value – in the form of innovation, entrepreneurship, and growth – to the economy. They use their wealth to consolidate their power, by influencing regulations and government policies. This has happened in many instances – we see it in our military and drug companies, in our banks that succeeded in stripping away regulations, which allowed them to earn huge profits at the expense of the rest of society – and it's not a model for a competitive dynamic economy.
The median income of a male worker today is lower than it was in 1968; for the past 30 years, economic growth first concentrated at the top, and then we started seeing a slow, long decline of middle class wages.
This issue is specially damaging in Connecticut. CAHS and Connecticut Voices for Children, in a recent study (PDF) examined income inequality in our state. The results are highly discouraging. The share of total state Adjusted Gross Income (AGI) going to the top 1 percent has soared over the last two decades, increasing from 17% to 28%. Connecticut’s inequality ranks second only to New York in the US. Income growth for those in the lowest quintile has been negative:
The numbers are even more dramatic when we consider that Connecticut used to be one of the most equalitarian states in the nation. From our report:
This stands in sharp contrast to the Connecticut of old.In 1977-79 the gap between the richest and the middle fifth was the 42nd largest in the country - in only 8 states were the rich and the middle closer together. In 2005-2007, the gap had grown to the 7th largest - the rich and the middle were the closer together in 43 other states.
Reasons behind these changes are many. The two main drivers of the change in the state have been the decline of middle class manufacturing jobs, and the emergence of finance and its fortunes. The main explanation for this shift in the economy and the rise of inequality nation-wide, however, is simple: policy. Stiglitz:
Our society took a turn around 1980 around the time when Reagan came into office. During World War II, our country fought together and was brought together by the war. In the decades after, the country grew together: the incomes of the people at the bottom grew more than those at the top. We passed the GI bill which provided our veterans with the opportunity for higher education, enabling them to get a better job, buy a home, and to move up in the world, and many seized that opportunity. During this time, our economy grew quickly and there was shared prosperity.
But then attitudes started to change and Americans were sold a bill of goods — that lower taxes, de-regulation, more corporate welfare, and less help for the poor would help our economy grow even faster, but it didn’t. Ultimately, they sold Americans on the bill of goods that if those at the top did well, the benefits would trickle down and everyone would benefit. But those in the middle and the bottom have not fared well. Instead, we became a more divided society. We passed bad bankruptcy laws, we didn’t enforce anti-trust laws as effectively as we should have. The effect of individual laws may have been small in and of themselves, but together they had a great impact. As I state in my book, inequality didn’t happen overnight. Instead, it grew as a result of a large number of seemingly small decisions.
All this can be changed, but it will take time and effort. Our first step, in any case, has to be to acknowledged that America is a place where the middle class is thriving.