General Assembly Balks At Economic Reform Initiative, Votes For More Study
By Steven Singer
With the flight of corporations, young people and retirees from Connecticut and its stagnant economy, the General Assembly was under pressure to respond.
But before adjourning Wednesday and heading for the campaign trail, state lawmakers scaled back a sweeping set of recommendations intended to point Connecticut in a different direction as it struggles with declining revenue and a shrinking economy.
Legislators reworked proposals by the Commission on Fiscal Stability and Economic Growth, a group of business owners and executives, into studies on rebalancing state taxes, making revenue collection and expense management more efficient and reforming the teachers’ retirement system. A report to the legislature is due Feb. 1, 11 months after the commission submitted its report.
Lawmakers will consider a 30-year contribution of proceeds from the state lottery to the Teachers' Retirement Fund to pay down unfunded liabilities and allow schools to hire volunteers to perform work such as buildings and grounds maintenance.
The legislature “once again focused on short-term budget fixes rather than on long-term structural reform,” said James Smith and Robert Patricelli, the commission’s chairmen.
“Perhaps that is all that can realistically be expected in a short session and in an election year,” they said.
Smith and Patricelli pointed to inaction by the legislature on commission proposals such as putting state employee pension and health care in the General Assembly’s jurisdiction rather than at the bargaining table with public sector unions; reforming a “broken legislative process of budget management”; and supporting bonding for transportation rather than backing a contentious plan for highway tolls.
Still, they said the studies called for by the legislature are a “start down the long road of fixing our state’s deep-seated problems.”
The 14-member commission proposed March 1 cutting the personal income tax, raising sales and corporate taxes and removing state employee fringe benefits from collective bargaining.
It also called on the legislature to reform the teachers’ retirement system, pay down unfunded liabilities and build a science, technology, education and math campus in one city in partnership with a major research university.
The legislature was required to do something with the report — another study would do — to avoid sending the plan into oblivion, to which previous reports were dispatched.
House Republican leader Themis Klarides on Thursday defended the legislature’s preference for studies, particularly on rebalancing state taxes and reforming the teachers’ retirement system.
The legislature will get an overall look at “what a tax restructure looks like in the state from top to bottom,” she said.
Her Democratic counterpart, House Majority Leader Matt Ritter, said the new legislature and governor who take office in January can adopt commission recommendations — highway tolls, a $15 minimum wage, a reduced income tax and a “more competitive” estate tax — that could win bipartisan backing.
“As an overall package maybe that’s the kind of thing that moves some of these things forward that get stuck when you have it individually,” he said.
They’re learning about this crazy governmental process we have.— House Republican Leader Themis Klarides
Klarides and House Speaker Joe Aresimowicz said Smith, a retired chief executive and current non-executive chairman of Webster Bank, and Patricelli, a health care executive, faced a learning curve as they lobbied the General Assembly, which may appear to outsiders as opaque and Byzantine.
“They’re learning about this crazy governmental process we have,” Klarides said.
“They learned it’s just not one person at the top that makes the decisions,” Aresimowicz said. “You have to build a consensus.”
Gov. Dannel P. Malloy and the legislature established the commission last year as part of the budget agreement reached four months after the end of the state’s fiscal year. They responded to calls from some in the business community who said an outside perspective from business owners and executives is needed to find ways to reboot Connecticut’s economy and state finances.
The U.S. Commerce Department reported early this month that the state’s economy shrank for the second consecutive year in 2017. Connecticut ranked 49th among the states in growth, falling from 32nd place in 2016. Only Louisiana turned in a worse performance.
The state’s unemployment rate of 4.5 percent in March compared with a U.S. jobless rate of 4.1 percent. And Connecticut has recovered just 80 percent of jobs lost in the recession. In comparison, the U.S. economy has more than doubled the number of lost jobs.
Added to the economic problems are chronic budget fights in the legislature. Democrats and Republicans enacted bipartisan budgets in 2017 and again last week, but businesses have not been impressed.
Executives and business lobbyists criticize pension liabilities, frequent tax increases and treasure hunts by the legislature and Malloy administration for revenue to close budget shortfalls created by weak economic growth and the loss of high-paying manufacturing and financial-service jobs.
“We consistently hear from our members that a major cause of substandard growth is the state’s precarious fiscal situation,” said Joe Brennan, chief executive officer of the Connecticut Business and Industry Association, the state’s largest business group.
The commission’s report drew fire from some in business for its call for higher taxes and from organized labor for its suggestion to end collective bargaining for state employee fringe benefits.
“The problem we had with the commission was the narrow focus,” said Lori Pelletier, president of the Connecticut AFL-CIO.
She criticized the commission for failing to cite the state’s high energy costs that make doing business in Connecticut more costly than in other states. Organized labor and its allies also criticized the panel as too skewed to business interests.
Greenwich Democrat Ned Lamont, who is running for governor and is a favorite of unions, criticized the commission for not including representatives of organized labor.
The issues of economic growth and tax and spending policies will likely be the top issues debated this year by candidates for the legislature and governor.
“It’s going to be hard to shake us,” Smith said.
Patricelli said the report is timely and may set “some of the terms” for the political season.
“There’s no sweeping this under the rug,” he said.
Read original story here: http://www.courant.com/business/hc-biz-competitiveness-commissio-20180510-story.html