The income tax raised nearly $1.3 billion less than budgeted in the last fiscal year, which ended in a record $925.6 million deficit. The state government is covering that shortfall with borrowed money.
The current year is showing no signs of improvement.
Are we on our way to being the next California? Read more here at the Republican-American.
The Courant’s Rick Green opines that incumbents like Mr. Dodd and Mrs. Rell are in trouble as unemployment here will hit 10% in 2010. Quoting Mrs. Rell’s top economic advisor:
Delinquency rates on single-family mortgages have risen four-fold since 2006, and consumers are spending less and saving more given overall economic uncertainty. This means continued pressure on state sales and use taxes, incomes taxes, and corporate income taxes, your three big generators of state tax revenue. Bottom line conclusion: I highly doubt that our state budget problems have been resolved, only delayed and postponed.
A report from The Warren Group paints a bleak picture of 2009 Connecticut:
Personal bankruptcy filings in Connecticut skyrocketed 44 percent in the third quarter compared with a year earlier as job losses and salary cuts squeezed household budgets burdened by high credit card bills, a new report showed Monday.
There were 2,569 personal bankruptcy filings in the state in the three months ending Sept. 30, compared with 1,773 for the same period in 2008, according to the report from The Warren Group.
“It all boils down to consumers that are stretched too thin,” said Donald L. Klepper-Smith, an economist at DataCore Partners Inc. in New Haven. “It’s the basic lack of income in an economic downturn.”
Connecticut has lost 79,100 jobs since employment peaked in March 2008. When the state releases its September employment report today, Klepper-Smith said he expects that the state will have lost 1,500 to 2,500 additional jobs.
Governor Rell will allow the budget which has been passed by the Legislature to take effect. From Mrs. Rell’s press release:
“Democrats have repeatedly called this budget a ‘compromise,’” Governor Rell said. “It is hardly a compromise. Last week I put a new budget proposal on the table – my fourth – in which I accepted tax increases I did not want in return for cuts in state spending. The Democrats just could not cut, once again showing they are unwilling – or simply unable – to make meaningful reductions. They refuse to accept the reality that families and businesses accepted months ago: We must live within our means.
“Instead, this budget calls for more borrowing and vague plans for future savings,” the Governor said. “Worse still, in the hours before this budget was brought to a vote the Democrats had the audacity to add more spending. It is as if they believe the people of Connecticut do not care, are not watching and will not notice.
“Because of this complete disregard for our taxpayers, I will be using my line-item veto to eliminate all of the new earmarks and pork-barrel spending. The total is some $8 million – not an overwhelming amount in the scheme of the two-year budget. But this spending is an insult – a slap in the face of our taxpayers.
“I will not veto the entire budget,” Governor Rell said. “However, I will not sign it into law, because I do not believe in this budget. I do not want, by my signature, to put a stamp of approval on their spending, their inability to make cuts or their levels of borrowing, revenues and taxes.
“But a veto will not bring significantly different results, I fear – and the people of Connecticut are starting to truly feel the effects of our stalemate. This budget crisis has lingered longer than any in state history. Struggling families, people who have lost their job or their home, people with disabilities, cities and towns, schools, state agencies and non-profits – all have been left wondering about the future. They need to know state resources are in place and available. Now they will know.
“Let me repeat: This budget is not the compromise I sought – but it is a fight that has saved our taxpayers billions of dollars,” Governor Rell said. “By digging in my heels, I have forced the Democrats to sharply lower their demand for new taxes. They went from $3.3 billion in new taxes in their April budget to $2.5 billion in the June budget, dropping to $1.8 billion in their July budget – and $900 million in the current proposal.
“This budget reduces the corporate surcharge that the Democrats first proposed at 30 percent to 10 percent over the next three years, and excludes nearly all small- and medium-sized businesses in the state. This budget makes significant changes and reductions in the inheritance tax and requires the state sales tax to drop. And it does cut some state spending. Most importantly: This budget crisis must be resolved. For the good of our state, this crisis is now resolved.”
Connecticut received another black eye today when the popular Drudge Report website carried a picture of our legislators in session playing solitaire on their laptops.
Still operating without a budget, but at least the two sides are agreed on the size of the budget deficit. From the Courant:
It’s $8.558 billion — which is different from the $8.7 billion that was originally projected by the legislature’s nonpartisan fiscal office and far different from Rell’s original $6 billion estimate.
Even though the two sides finally agreed over the long-contested estimate, the number is sure to change. Any upticks or downturns in the state income tax, sales tax, corporate tax or other revenue source over the next year will change the number.
The new deficit will prompt Rell to offer an updated budget, but she does not appear to be changing her mind on taxes. Since February, Rell has declared that the budget can be balanced without tax increases.
Rell remains very popular, although her poll numbers have fallen some.
Governor Rell has signed an Executive Order (read here as a PDF) which keeps the State running. Quoted in the Courant, Mrs. Rell said,
Rell said Tuesday that while the negotiations continue, “first and foremost, people should rest assured that state government will continue to operate — services will be delivered; we will care for the vulnerable and the sick; public safety and public health will be protected.”
“I remain hopeful that we will resolve the budget issues that divide us and bring an affordable, responsible budget proposal to the General Assembly for a vote in the very near future,” Rell said. “In the interim, I am taking all of the steps necessary to ensure that state government functions smoothly.”
Budget woes continue elsewhere. In East Haven, teachers are being laid off. Positions are being trimmed in Torrington. We’re sure more examples could be put forward. Please keep on praying for our State!
More meetings to come on Monday, and the current fiscal year ends Tuesday. Remember to pray for the State budget and deficit. More here from WCBS radio:
Minnesota Governor Tim Pawlenty
Republicans are out of power in Washington and many other places around the country. They’re out of power here in Minnesota, too, except for Governor Tim Pawlenty. But in this case, one man has been enough–Pawlenty has faced down the Democrats and beaten them.
The Democrats tried to ramp up Minnesota’s already out of control spending and pay for it with a $1 billion tax increase. But Governor Pawlenty, who recognizes that Minnesota’s booming public sector can only come at the expense of private sector growth, vetoed the tax increase. His veto was upheld in the Minnesota House, with all Republicans and two Democrats voting to sustain it. The Democrats in the legislature then refused to pass a responsible, balanced budget as required by state law.
That left Pawlenty, like Horatius at the bridge, standing alone but victorious. He announced that he would use his power of “unallotment” to decide where the state’s revenues will be spent over the next two years.
Pawlenty will cut over $700 million, according to the Star Tribune. I don’t think Governor Rell has any such powers but our own battles proceed and it seems the knives are coming out of the drawers:
I have very little idea – and neither do you. What is certain is that there will be a lot more bloodletting before it’s over. Here’s an interesting map of the Governor’s proposed cuts (caveat: prepared by Senate Democrats). Hat tip: Connecticut Local Politics.
View Governor Rell’s Proposed Cuts in a larger map
Annoyingly clear thinking from Don Pesci:
The rich ain’t gonna get us out of this ditch.
Here’s why: The real problem in Connecticut has been caused by accumulative excessive spending, a problem only a brave few in the legislature want to solve.
Prove it, doubters say. The proof is in the astounding growth of the bottom line of the budget. The 8 or 9 billion deficit yet to be discharged is larger that the last pre-income tax budget of a little less than two a decades ago. And the present budget is three times as large as that more modest $7.5 billion budget; that’s an increase of an entire budget for each of the three governors who followed the late Gov. William O’Neill into office. Collectively, these governors, and the legislators who during this period used budget surplus after budget surplus to increase spending, are the problem.
Read the rest here: Permanent Spending Cuts, Temporary Taxes.