Despite a “Booming” economy, tax revenue is down. Connecticut is reaching into its emergency fund during the good times. What’s going to happen when the recession actually hits?
Connecticut is once again coming up short on cash, and its rainy-day fund is already strained.
About halfway into the budget year, sales and income tax revenues have come in about $208 million under projections. That comes even after lawmakers enacted deep spending cuts, raised fees on motor-vehicle registrations and required teachers to contribute more to their pensions to pass a two-year budget in a bruising process that took 10 months.
Shortfalls have “caused us to tap our rainy-day fund, our budget-reserve funds,” Paul Potamianos, the state’s executive budget officer, said on a conference call. “This is a problem for us because our reserves are not growing,” even though the nation is not in a recession, he said.
The state’s reserves of $213 million currently comprise about 1.1% of expenditures. That compares with a forecasted median of 5.1% around the U.S. this fiscal year, according to a report released Thursday by the National Association of State Budget Officers, or Nasbo.
To close the gap, the governor has asked state lawmakers to cut spending and raise taxes. Liberals might call these proposed tax increases “regressive” since they more severely impact low-income families.
You see, the governor has proposed increases on sales taxes and cigarettes. Smoking is more prevalent among the lower-educated and those living below the poverty line, according to the CDC. And sales taxes take a higher portion of a low-income family’s total income than a rich family’s income.
TEACHER PENSIONS BANKRUPTING STATE
One major problem is that costs associated with the teacher’s pension fund have sky-rocketed. For the last decade, Connecticut’s teachers have gotten approximately $47,000 annually as a part of their pension. That came at a cost of about 6% of their salary per year. Compare this to Massachusetts, whose teachers get about eight grand less ($39,000), but at a higher cost of 11% of their salary that they must contribute.
But now, for teachers who retired beginning in 2016, that pension benefit increased to over $59,000 – which is a huge increase of about 25%.
It’s no wonder that Connecticut’s pension system is the worst in the country…