CAUTION VS. ELECTIONS

Republican Gov. Jodi Rell delivered a combined budget and state of the state address last week on opening day of the 2008 General Assembly session. Rell told a joint session of the House and Senate that "the state of the state is strong—and I will do everything in my power to keep it that way."

As she has in the past, Rell used her budget message to urge fiscal restraint. "The budget I present does not exceed our state spending cap and it does not raise taxes," she declared. "It does not spend what the people of Connecticut cannot afford."

In setting that belt-tightening tone, Rell urged the Democrat-controlled legislature to use "fiscal caution" as it takes her plan and melds it with their own tax and spending priorities. While both parties are talking up bipartisanship right now, Rell's cautionary tale may not be heeded.

Example: Rell wants this year's state budget surplus, projected to be between $160 million and $260 million, placed in the state's "rainy day fund." That reserve now totals about $1.4 billion. However, key Democrats and Republicans are seeking to use the current surplus to finance an emergency economic relief plan for Connecticut families. This could include property tax credits, energy aid, even rebates.

State Senate President Pro Tempore Donald Williams (D-Brooklyn) said the difference between lawmakers and the governor on the surplus is that "the governor wants to keep it, and we want to give it back
(to taxpayers)."

The driving force between this difference in goals is the 2008 election. All 187 lawmakers are up for reelection, and the governor is not. Lawmakers in an election year want to "do things," propose and pass initiatives, to stave off the voter question: "What have you done for me lately?"

Of course, doing things usually means spending money and Rell knows that. That explains her persistent urgings of fiscal "caution." Democrats say they are not proposing massive spending that could force higher taxes. They are simply talking about using surplus funds.

Rell's budget chief, Robert Genuario, a former state senator, said spending the surplus is by no means risk-free. Whether you peg the surplus at $260 million or $160 million, Genuario claims it is not real money…just a "projection." Of late, the projection has been trending downward, perhaps reflecting the dicey nature of the U.S. economy in recent months.

Lawmakers in both parties have talked about getting together in a bipartisan effort to enact an emergency economic relief package soon—perhaps by the end of February! They claim taxpayers need help now. The fact that Congress, often a "do nothing" body, has approved an economic relief package that could send rebate checks to Connecticut taxpayers by May only makes state lawmakers more determined to vote soon.

However, what happens if the legislature spends the surplus and Genuario's fear comes true, with the modest projected surplus evaporating by the end of the fiscal year in June? That could put the legislature in the embarrassing and difficult situation of being forced to cut state programs to compensate for the "lost" surplus already spent.

The next few weeks should tell us which message will win out—Rell's call for caution or lawmakers' desires for an election year tax break for consumers. Stay tuned!

Posted 2/11/08

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