Despite a series of credit-rating cuts by all three of the major ratings agencies earlier this year, Connecticut still boasts a higher rating than Illinois and New Jersey. But that could soon change.
Lawmakers are squabbling over how to close a massive deficit expected to stretch to $3.5 billion over the next two years, which has left Connecticut as the only state in the US without a budget for the current fiscal year. And if lawmakers fail to pass a budget by the end of the month, it could trigger further cutbacks and in essential services.
The wealthiest state per capita, Connecticut has struggled to stabilize its deteriorating finances as generous (and underfunded) pension obligations and the departure of wealthy taxpayers like hedge-fund billionaire Paul Tudor Jones, Aetna and GE – two Fortune 500 companies that have decided to relocate their headquarters to New York City and Boston, respectively – have drained the state’s coffers, threatening to trigger a financial chain reaction that could end with the bankruptcy of the state’s historic capital, Hartford.
Initially one of roughly a dozen states that faced last-minute budget battles in June, the state has now gone nearly three months without a budget. It has been operating under an emergency order signed by Gov. Dannel Malloy that includes dramatic cuts in state funding for social services programs. Those cutbacks will expand if the standoff continues for another week, growing to encompass essential funding that Connecticut cities and municipalities rely on to fund public services from education to public safety, according to the New York Times
The executive order that controls state spending has already frozen millions of dollars in contracts and grants and limited support sent to municipalities. If a new budget is not reached by Oct. 1, many towns and cities are expecting a much smaller fraction of the usual amount from the state – or nothing at all.
This month, city officials in Hartford, which faces a nearly $50 million deficit, sent a letter to the state cautioning that a failure to reach a budget compromise with sufficient aid would make pursuing bankruptcy almost inevitable. The officials, including the mayor, Luke Bronin, noted that further cuts would force them to eliminate, and not simply reduce, essential city services.
And now that Gov. Malloy has said he will reject a Republican sponsored proposal that passed both the Connecticut State Senate and the Assembly, lawmakers are scrambling to head back to the drawing board as their constituents warn of potentially devastating cuts if they’re not able to pass something – anything – that resembles a budget.
To be sure, the Republican proposal also called for dramatic cutbacks to the state’s share of municipal spending, as well as its contribution to the state university system.
“I was surprised when the budget went through,” said Sen. Len Fasano, a Republican leader, even though he helped orchestrated the effort. “I think it takes a lot of courage,” he added, referring to the Democrats who supported the plan.
At the University of Connecticut, which stood to lose at least $200 million over two years, its president, Susan Herbst, wrote a letter to students, faculty and alumni, warning of closing campuses and departments, ending majors and programs, as well as reductions in research, athletics and financial aid.
Mr. Malloy has vowed to veto the legislation, citing “irresponsible changes” to pensions, a lack of sufficient support for Hartford and other cities and cuts to school funding that he saw as excessive and threatening districts that struggled the most.
Some towns would have their entire state contribution cut, forcing them to cut public services to the bare minimum.
In Portland, a town of about 10,000 south of Hartford, officials said that if a budget were not reached by the start of next month, they stand to received just over $10,000 from the state – not the $4.6 million they had expected. “You just can’t do this to communities,” said Susan Bransfield, the first selectwoman.
“They need to leave the partisanship at the door, and put Connecticut first.”
Meanwhile, towns across the state have been unable to pass their budgets without knowing how much money they will receive from the state. Connecticut has seen its population decline over the past three years as Gov. Malloy has passed a series of tax hikes. Regardless of the outcome of this round of state-budget-chicken, Connecticut residents should probably brace for the possibility that taxes could rise further, while government services endure painful cutbacks.