The 25-member commission is chaired by former state Rep. Patricia Widlitz and William Cibes Jr., Ph.D., who served as secretary of the Office of Policy & Management under Gov. Lowell P. Weicker Jr. The Commission is tasked with making recommendations on how to make the state's constitutional spending cap workable and enforceable. The cap was proposed by the legislature in 1992, one year after it created the state income tax; voters overwhelmingly approved the cap.
However, state Attorney General George Jepsen ruled last year that the cap is not enforceable, because the legislature has still not developed definitions to be used to define what expenditures are covered, among other things. The legislature has basically avoided this issue for 24 years, playing games with what is and is not covered by the cap.
The Commission must submit recommendations for definitions to the legislature by December 1, and will hold its final meeting on November 28 to vote on those recommendations. This is no small matter; if the General Assembly ever wants to end the cycle of financial crisis it keeps finding itself in, getting spending under control is a key part of that.
What follows is the testimony I submitted to the Commission during Wednesday's public hearing. If you want to learn more about the Commission, you can do that here.
Here is my statement to the Commission:
Chairnan Cibes, Chairwoman Widlitz, and members of the Spending Cap Commission, thank you for the opportunity to address this important issue, and also for bringing today’s public hearing to Waterbury and to Naugatuck Valley Community College. I am David Krechevsky, the director of public policy & economic development for the Waterbury Regional Chamber.
The Waterbury Regional Chamber is one of the state’s largest and most active chambers of commerce, serving 14 communities in Greater Waterbury and representing the public policy interests of its nearly 1,000 member businesses. Those businesses range from major corporations to nonprofit organizations to sole proprietorships. Many of our members participate on the Chamber’s Public Policy Committee, which annually produces a Legislative Agenda. The Agenda is a list of our members’ public policy priorities, and we share it each year with members of our region’s legislative delegation.
For both the 2016 Agenda and the coming 2017 Agenda, the top priority is making the state spending cap workable and enforceable. With everything that is happening, both in Connecticut and our nation, our Public Policy Committee believes the spending cap is the most important issue. Let me explain why.
It starts with the deeply rooted belief among our members that the state is incapable of getting its fiscal house in order. Our members have watched over the past several years as the legislature imposed the two largest tax increases in state history while also making cuts that adversely affected the most vulnerable, yet without solving the problem of significant deficit after significant deficit. They have watched as some of their peers made the difficult choice to leave Connecticut for a state with a more business-friendly climate, or worse, chose to close their businesses because they could not survive under the weight of constant tax and fee increases and unduly burdensome regulations.
I know that some in the legislature believe that such negative talk paints an unfair or inaccurate picture of reality, and that it hurts the state’s image and creates an atmosphere of negativity. Those who make that claim have it exactly backwards. It is the cycle of budget crisis after budget crisis that creates the negative talk, not the other way around.
Fiscal stability and certainty — that is what the member businesses of the Waterbury Regional Chamber, and citizens of Connecticut in general, want from their state legislature. Actually, it is what they demand from their legislature, and it is what they should expect. The state must exit the funhouse of smoke-and-mirror budgeting and come into the light of fiscal reality and responsibility.
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The legislature can take a big step in that direction by finally fulfilling the wishes of the citizens of Connecticut, who voted overwhelmingly in 1992 in favor of a spending cap.
Those wishes, however, have seemed more like wishful thinking since that vote 24 years ago, because from the imposition of the state income tax in 1991 through 2014, state government spending grew 71 percent faster than the rate of inflation. In fact, between fiscal 2014 and 2015, total state spending rose by about 5.1 percent, while the cumulative rate of inflation (based on the Consumer Price Index) fell 0.1 percent. That kind of spending growth is unsustainable, and that’s why the Chamber supports an enforceable spending cap. The state must learn what its citizens and businesses already know, that we all must live within our means. An enforceable spending cap will encourage legislators to prioritize state spending and serve to restore confidence in taxpayers that the General Assembly will respect the will of the people of Connecticut.
As you know, to make the spending cap enforceable requires approving definitions for “increase in personal income” and “increase in inflation,” and determining what state expenditures should be excluded from the cap. For the Commission’s proposed definitions for increase in personal income and increase in inflation, the Chamber agrees with the previously submitted testimony of James C. Smith, chairman and chief executive officer of Waterbury-based Webster Bank, a longtime Chamber member. As Mr. Smith stated in his testimony submitted on September 7, 2016, “the definitions for income growth and the inflation rate should look back over at least five years to smooth out volatility and ameliorate the impact of one-time events.” As currently proposed, the Commission’s definition for personal income growth looks back five years, but your definition for inflation growth does not. The Chamber supports making both definitions look back over at least five years. We also agree that capital gains should continue to be excluded from calculating personal income because of its volatility.
The Chamber also agrees with Mr. Smith that the most important issue the Commission faces is deciding what expenditures to exclude from the cap. Or, as Bob Seger put it, “what to leave in, and what to leave out.” This is the key issue, because if too much is left out from under the cap, the cap becomes meaningless. Again, the Chamber agrees with Mr. Smith that the cap must include all state spending other than debt service.
The Chamber realizes that some legislators are wary of the cap due to concerns about the need for emergency expenditures, should they arise. The legislators who created the cap foresaw this issue, and provided a safety valve: If the governor declares it necessary and three-fifths of the legislature vote to approve it, the cap can be exceeded.
The citizens of Connecticut have waited nearly a quarter of a century for the legislature to act on this, and with the state once again facing billion-dollar state deficits in the near future, they can’t afford to wait any longer.
The time to enact a workable and enforceable spending cap is now.
Thank you for this opportunity to speak with you today.