According to the Institute for Truth in Accounting (IFTA), Connecticut has been identified as the top financial “sinkhole” state in the nation. IFTA, a nonpartisan and nonprofit organization that works for greater accounting transparency across all levels of government and business, reports that the Constitution state is at the top of a list of five states which are in the worst financial position. According to the organization’s Financial State of the States report, Connecticut has $29.4 billion worth of assets, but only $10.1 billion are available to pay $63.4 billion of bills as they come due. In addition, each Connecticut taxpayer’s financial burden is $41,200.
The report indicates that the other four states considered to be financial “sinkholes” are New Jersey, Illinois, Hawaii, and Kentucky, all of which have a per taxpayer burden of over $23,000. However, Wyoming, North Dakota, Nebraska, Utah and South Dakota are considered “Sunshine States” because either a per taxpayer’s surplus or nominal per taxpayer’s burden exists in these states.
Interestingly, Republican Gov. Dave Heineman of Nebraska, a “Sunshine State,” was invited to Hartford by Democratic and Working Families Party Governor, Dannel Malloy, of Connecticut for a regional economic summit in October. Gov. Heineman’s description of his success in bringing about the largest tax cut in his state’s history, and Nebraska’s 4.2% unemployment rate- the second lowest in the nation- drew a sharp contrast to Gov. Malloy’s explanation of his experience in “straigtening out the state’s finances” by enacting the largest tax increase in his state’s history.
“I believe we’re moving in the right direction,” Mr. Malloy said. “The reason I did what I did with respect to the budget was so that I could look business in the face and say, ‘Listen, I believe we’ve got the bulk of our problem behind us. We’ve balanced a budget. We’ve taken the steps necessary to wrestle a structural deficit to the ground and we move forward.’ ”
Sheila Weinberg, founder and CEO of IFTA, however, disagrees. Ms. Weinberg said that Connecticut’s “state officials say their budgets are balanced but do not include employee pension and healthcare obligations in their calculations.”
Indeed, state Republican lawmakers vehemently opposed the budget proposed by Gov. Malloy, and passed by the Democratic legislature, which Mr. Malloy said would save the state an estimated $1.6 billion over the next two years and $21.5 billion over the next two decades. Calling for “shared sacrifice,” the governor’s budget raised taxes, including a retroactive income tax hike, and gave public sector unions- what even many Democrats considered to be- a “sweetheart” concession package. The union concession package, which passed on the second vote, only after state union leaders changed their ratification rules in order to make it easier for the plan to pass, also locked taxpayers into high costs for public sector pensions and healthcare benefits until 2022, when the retirement age for state workers is permitted to be raised by three years.
With the legislature’s nonpartisan fiscal office (OFA) unable to verify the savings in the state’s budget, Republican lawmakers say that at least $600 million of the $1.6 billion in savings are vague, including a projected $180 million in savings from state employees over two years that have yet to be defined.
State Senator Andrew Roraback, ranking Republican on the Senate Finance Panel, described the state’s budget situation as “scary.” “We’re talking about $200 million in assumed savings when there is no back-up,” he said.
Desperate for jobs in a state that has experienced little to no job growth in 20 years, Governor Malloy and Democrats in the legislature appear to be counting on even more “hope” with the passage of a bill which puts the state in the role of “venture capitalist.” Democrats voted to spend $291 million over the next decade, to partner with nonprofit Jackson Laboratory, an internationally renowned genetic research institute.
The partnership includes $192 million in funding to construct a 173,000-square-foot research center on the University of Connecticut Health Center campus. An additional $99 million will subsidize Jackson Laboratory’s research operating costs for the first decade. In return, the administration estimates, the project will create more than 7,400 jobs over twenty years, or about 370 jobs per year.
Connecticut’s funding of the project will be financed over 20 years, with costs to the state of an additional $153 million in interest, according to the nonpartisan OFA. Below, Republican Representative Sean Williams articulates the concerns about the lack of information regarding details of the partnership:
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Sounds like a lot of money that a “sinkhole” state does not have, to spend on a venture that is inherently risky (biomedical research), for a minimal number of private sector jobs that a “sinkhole” state needs desperately. However, if you are Gov. Malloy, and you are standing in the shadow of President Barack Obama, the champion of the public sector, perhaps private sector jobs are not really all they’re cracked up to be.
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