Connecticuts State Budget Process: The What, Why and HowAnd Why You Should Care

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Connecticuts State Budget Process The What,
Why and HowAnd Why You Should Care

• A Presentation by
• Connecticut Voices for Children
• For
• Stone Soup The Power of Collaboration and
  Discovery
• October 26, 2004

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I. Budget Process ABCsII. Balancing
the BudgetIII. Monitoring Debt
AccumulationIV. Making Some Tough Choices
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I.Popular Conceptions of the Budget What do
we often hear when we begin to talk about
Connecticuts budget?
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Essential Yet Overwhelming The state
budget is essential to our communities as it
funds programs like education, Medicare, and
transportation. Still, the process is too
complex to try and understand.

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How can citizens better understand the budget and
the budget process?
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Know The Budget Process ABCs

• Biennial Budget
• Role of Agencies, OPM, Governor
• Role of General Assembly-Committees
  Leadership
• Budget Bills, Implementers, Final Budget

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Think of it as a Family Budget

• A budget is essential to all of Connecticuts
  households and families
• Like a family, the state must
• Balance income and expenses
• Monitor the accumulation of debt
• Make some tough choices

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I. Budget ABCsII. Balancing the BudgetIII.
Monitoring Debt AccumulationIV. Making Some
Tough Choices
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II. Balancing the Budget

• Some essentials
• Appropriations
• Revenues
• Tax Expenditures
• Statutory and Constitutional Limitations

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Appropriations Spending the States Money

• Appropriations Committee (considers proposals
  on how to spend)
• Public Hearings to gather input from
  government officials and the public

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Where Does the Money Go?

• In descending percentage order, the 2005 budget
  funds are going to
• Human Services (27.1)
• Education (20.1)
• Debt Service (12)
• Other Non-Functional (11.9)
• Health and Hospitals (8.8)
• Corrections (8.3)

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Where Does the Money Go?

• General Government (3.1)
• Judicial (2.8)
• Regulation and Protection (2.3)
• Transportation (2.6)
• Conservation and Development (0.6)
• Legislative (0.5)

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How Does Connecticuts Spending Compare to Other
States?

• 2nd most frugal state in the nation
• 50th (lowest) in total state and local spending
  on education as a share of total personal
  income
• 48th (3rd lowest) in spending on housing and
  the environment

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Revenues Raising the States Money

• Finance, Revenue and Bonding Committee
  (review collection of taxes, other revenues and
  bond requests)
• Public Hearings to gather input from
  government officials and the public
• Contrast Appropriations Hearings

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Where Does the Money Come from?

• Estimated Sources of 2004 Revenue
• Personal Income Tax (48)
• Sales and Use Tax (34)
• Other Revenues (12)
• (including Federal Funds)
• Business Taxes (6)

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Shifting Revenue Burdens
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Tax Expenditures A Form of Hidden Spending

• Tax Expenditures provide preferential
  financial benefits to one or more taxpayers
  through the tax code.
• Tax Expenditures (preferential tax credits,
  exemptions, exclusions and deductions) are
  exceptions to taxes that the state otherwise
  collects.

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Tax Expenditures A Form of Hidden Spending

• Unlike appropriated expenditures, tax
  expenditures
• are rarely revisited
• become permanent revenue losses,
  regardless of changed economic conditions or
  evolving public policy, and without an
  assessment of their continued value to the
  state.

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Tax Expenditures - Reducing Government
Accountability

• Information about corporate tax expenditures is
  often unavailable to lawmakers and to the public
• Which companies are claiming credits?
• In what amounts?
• Does a given credit benefit large or small
  corporations?
• Does a given credit benefit in-state or
  multi-state or multi-national corporations?
• What return on investment is the state
  receiving?

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Tax Expenditures Growing Cost

• In Fiscal Year 05, Connecticut will forego 4.4
  billion through tax expenditures while
  collecting 12 billion in tax revenues.

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Tax Expenditures Can Grow Unchecked
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What would Connecticuts spending look like if
tax expenditures were included in the
appropriations pie?
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Limitations on Connecticuts Budget

• Constitutional Amendment Requires a Balanced
  Budget (28th Amendment of CT Constitution,
• adopted in 1992)
• Spending by the Appropriations Committee must
  be reconciled with anticipated revenues

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Limitations on Connecticuts Budget

• Connecticuts statutory spending cap limits
  growth in general budget expenditures to the
  greater of
• 5 year average growth of CTs personal
  income or
• annual growth of CPI (inflation)
• Can only exceed with Governors emergency
  declaration and 3/5 of both chambers

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Spending Cap Good News. . .

• Annual state spending growth was much slower over
  the last 9 years than the year before.

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. . . Bad News

• The spending cap also creates
• An incentive to borrow
• Increased use of tax expenditures
• Inability to maximize federal funds due to
  Connecticut

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I. Popular Conceptions of the BudgetII.
Balancing the BudgetIII. Monitoring Debt
AccumulationIV. Making Some Tough Choices
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Connecticuts Debt Where We Rank

• Connecticuts has one of the highest per
  capita bonded debts in the country (12.4 billion
  in July 2004)
• If Connecticuts debt burden was divided
  equally amongst all residents, we would each owe
  3,600
• The Associated Press, State Debt Among Nations
  Highest. July 19, 2004.

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Connecticuts Bonding Has Increased

• From 1992-2002 Connecticuts bonding and loans
  jumped 74
• Connecticuts borrowing is comparable to larger
  states like Texas or New York
• The Associated Press, State Debt Among Nations
  Highest. July 19, 2004.

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The pattern has been to borrow and spend
instead of tax and spend.

• -- Stanley McMillen, Economist,
• UCONN

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Not all borrowing is bad. If you borrow 1
million to build a school, and turn out students
who are more productive members of society over
30 to 40 years, you more than pay off that debt.

• -- Stanley McMillen, Economist,
• UCONN

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Connecticut Has Borrowed Money for Small Projects
and Operating Expenses

• To avoid spending cap restrictions, CT has used
  borrowed money not only for large capital
  projects, but also to pay some current operating
  expenses.

Bond funds have been used for 24-speed bicycles
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The State Comptroller reported that of the
1.33B in bonded debt that occurred in FY 01

• 61 (816 million) was for infrastructure or
  other assets benefiting future generations
• 39 (511 million) was used to fund on-going
  state operating expenses, deferring much of the
  cost to future generations.

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I. Popular Conceptions of the BudgetII.
Balancing the BudgetIII. Monitoring Debt
AccumulationIV. Making Some Tough ( Smart)
Choices
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The Choice to Create a Sound Economy

• Make proven investments in children
  families Education (pre-K, K-12, Higher Ed,
  Lifelong Learning)
• Make proven investments in families the Earned
  Income Tax Credit

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The Choice to Create a Sound Economy

• Modernize CTs Revenue System
• Review Tax Expenditures and Work with Other
  States to End the Race to the Bottom
• Review the State Spending Cap so It Works For
  Us, Not Against Us

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The Choice to Spend Our Money Smarter

• From FY 02 05, the fastest growing areas of
  state spending were
• Debt Service 42 increase (389
  million)
• Department of Correction 12.0 increase
  (61 million)
• Dept. of Children Families 9.5 increase
  (103 million)

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Cant We Spend It Smarter?

• 516M/year on 19,000 inmates (27,000/year/per
  inmate), not including debt service on the
  prisons
• 494,000/year for a single DCF placement at
  Riverview Hospital (1348/day/child)
• BUT WE ONLY SPEND
• 31M/year for all higher
• education need based
• scholarships

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The Failure to Fix CTs Fiscal Boat Is Resulting
in Penny Wise Pound Foolish Budget Choices

• EX
• Continued cuts to K-12 and higher education will
  result in a less well-educated workforce and
  higher property taxes, making CT less desirable
  to businesses.
• Continued cuts to mental health and substance
  abuse services will result in DOC and DCF
  populations continuing to soar at a cost to CT
  of 35,000/year to more than 325,000/year per
  person, and incalculable cost to families.
• Continued failure to invest in CT
  transportation system and housing stock will
  deter businesses from growing in CT and families
  from moving and staying in CT.

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Connecticut Has Choices

• Connecticut
• has the nations highest per capita income.
• has one of the nations best educated workforces
• ranks 1 in millionaires per capita.
• If ranked as a country, CT would be the
  wealthiest nation in the world.
• Even without Fairfield County, CT has the
  nations 3rd highest per capita income.

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The Choice to Spend It Smarter

• Repair the state spending cap
• Require greater transparency and accountability
  for tax expenditures
• Invest in more programs with proven returns

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The Choice to Invest in Programs with Proven
Returns

• Mental health services
• Early care and education
• K-12 education and higher education
• Health services
• Job training
• Housing

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The Choice to Avoid Negative Consequences such as
. . .

• Less educated, productive and skilled workers
• Less healthy children, adults, workers
• More costly types of care
• Diminished capacity to remain economically
  competitive in a global economy
• Reduction in quality of life

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Make the Choice to Invest in Connecticuts
Children and Families

• Connecticut residents strongly oppose cutting
  programs that support children and youth as a
  means of balancing the state budget.
• A 2004 UCONN poll found
• 83 opposed cuts in funding to towns for public
  education
• 82 opposed cutting programs for the poor
• 82 opposed cutting public health programs
• 76 opposed cuts to CTs state universities and
  colleges

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If we want to invest in the prosperity of our
nation, we must invest in our children so that
their talents may be fully employed."

• --President William J. Clinton

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For more information contact Ellen Scalettar,
JD (escalettar_at_ctkidslink.org)Shelley Geballe,
JD, MPH (yalie4567_at_aol.com)at CT Voices for
Children33 Whitney Ave. New Haven, CT
06510203-498-4240 (Phone) 203-498-4242
(Fax)www.ctkidslink.org