In Connecticut, state law mandates a balanced budget — a tricky proposition in any year but one causing particular trouble now as the state grapples with an ever-growing deficit in the midst of an economic downturn.
Part of a nationwide trend in state governments, the current economic slump has wiped out Connecticut’s budget surplus, leaving the state with a projected $650 million deficit for the next fiscal year and forcing state lawmakers to slash government spending and scour for more revenue.
In an effort to spare social service programs, this month more than 60 social advocacy groups united under the name One Connecticut publicized what they called a “common sense budget fix,” which focuses on alternatives to cutting social service programs, such as dipping into the state’s Rainy Day Fund and temporarily increasing income taxes for the state’s wealthiest residents.
Connecticut’s Rainy Day Fund now totals $600 million, but Dean Pagani, a spokesman for Gov. John Rowland, said the governor has no plans to draw from the account in the next fiscal year, which starts July 1.
“The Rainy Day Fund is the last resort,” Pagani said.
But One Connecticut and others said the purpose of the Rainy Day Fund is to ease budget crunches like the one the state is now experiencing.
“That’s what they’re there for,” said Elizabeth McNichol, the director of the State Fiscal Project for the Center on Budget and Policy Priorities in Washington, D.C. “Having a rainy day fund and not using it is about the same as not having a rainy day fund.”
One Connecticut has also proposed that the state temporarily increase the income tax on the state’s top income bracket. But Pagani rejected the idea of increasing the income tax for anyone in the state, saying such a move would hinder the state’s economy.
“Tax increases when the economy is slow has a tendency to slow things down even further,” Pagani said.
McNichol said that both spending cuts and revenue increases create a drag on the economy, but that unlike Connecticut, some other states are reaching into their rainy day funds to ease their deficits. But McNichol added that Connecticut’s fiscal problem is not as dire as those in other states.
Central to the governor’s efforts to close the deficit is a 61-cent increase to the state’s cigarette tax. The bill, heavily supported by Democrats in the state House and Senate, was approved by the state Legislature late last night in Hartford.