Connecticut Faces Budget Woes, Seeks U.S. Bailout of $6 Billion Hole

Published February 1, 2009

With Connecticut’s two-year budget deficit projected to hit a staggering $6 billion (and climbing), state officials are looking to the federal government for help instead of cutting spending.

Lawmakers made no significant cuts during a special session in late November, reducing the deficit by only about $71 million. Gov. Jodi Rell (R) will propose a new two-year budget in February.

“In difficult times like these, lawmakers need to make a distinction between needs and wants,” said Jonathan P. Williams, director of the Tax and Fiscal Policy Task Force of the American Legislative Exchange Council in Washington, DC.

The state’s Office of Fiscal Analysis and the governor’s office both project the combined deficits over the next two fiscal years, starting July 1, 2009 and ending June 30, 2011, will reach $6 billion.

Bipartisan Spending Protection

Republicans criticized the Democratic majority for not making deeper cuts in the current budget, but virtually all House Republicans voted for the overall bill, which passed by a 141 to 1 vote. State Rep. Craig Miner (R-Litchfield) was the only no vote.

State Rep. Christopher Donovan (D-Meriden), scheduled to become the new House Speaker, said he believes the federal government can solve Connecticut’s financial woes.

“We have signals from Washington that there is help on the way,” Donovan said.

But some local government officials, whose communities receive state funding, believe the state needs to address its budget problems without relying on a federal bailout.

“In order for Connecticut to move forward, our leadership must retool, developing policy that will encourage growth in new markets, reward an educated, motivated workforce, and build upon our existing quality of life,” said Town of Chester First Selectman Tom Marsh (R).

$632 Million Drop

Overall, the state expects to collect $632 million less in taxes than its original projection, because of revenue decreases in everything from the corporate profits tax to levies on cigarettes and real estate sales.

The legislature’s budget analysts project the income tax will raise $211.4 million less than originally forecast, along with $117.7 million less in the sales and use tax, $87.2 million less in the corporate business tax, and $77.2 million less in the real estate conveyance tax.

Mary F. Crean ([email protected]) is chief development officer at the Yankee Institute for Public Policy.