State Budget: The Sunset Solution

The July 4th holiday will come and go without a state budget in place for the fiscal year that began last Wednesday. The state House and Senate finally hammered out a plan that didn’t muster a veto proof majority in either chamber. A disengaged Governor suddenly got engaged in the last week of the 2009 FY to negotiate. At least the posturing stopped but the word out of the mansion on Prospect Avenue as we went to get our hot dogs for the weekend was “impasse.”

The deal breaker still appears to be the Governor’s opposition to inching up the state income tax for households making $500,000 or more a year. The irony in all of this is that the Governor less than three years ago came out for $2 billion in tax hikes to fund her education initiatives going considerably beyond current state obligations. State Rep. John Geragosian (D-New Britain), the House appropriations chair and part of the current negotiations, quipped at the time that she sounded like “Franklin Delano Rell.” If there is a moral or policy compass to Rell’s style of governing it hasn’t shown up since she took over from John Rowland.

Good economists, including ones the Governor employs over at UCONN, don’t hold much sway with Rell or Moody or Genuario. Their arguments are easily lost in the “no new taxes” mantra but include:

-Connecticut state government is no where near the top tier in spending per capita despite the almost total absence of county or regional taxing authorities;

-the Jim Himes crowd down in Fairfield County is taxed proportionately less than your middle income household in Berlin and New Britain when all local, state and federal taxes are considered.

One possible deal maker — sunsetting taxes and cuts to meet the crisis — has barely been mentioned in the back and forths since last April when legislative committees unveiled the first tax and spending plans.

Former state Rep. Astrid Hanzalek, an Enfield Republican, floated the sunset solution in a June 7th Courant Op-Ed article that solicited varying opinions on how to resolve the impasse.

“Cutting programs and raising taxes is the only logical solution,” wrote Hanzalek who served in the House for 10 years. “Those draconian measures sound like political suicide. Perhaps that’s why the governor and legislators have been in denial.”

Hanzalek’s suggestion — increases with a “built-in statutory (and enforceable) sunset provision” — diffuses the main concern of conservatives that a tax hike will be a license to grow the size of state government. At the same time she argues the cuts could be time limited as well and over time functions and services could be restored to get the state over the hump of the worst economic downtown since the Depression.

Given the depth and severity of the recession sunsets might need to be in place for more than two years, extending into the 2012-2014 period.

If Gov. Rell and her advisors are at all in touch with fiscal reality they know that some combination of tax increases and cuts will be necessary to preserve “core services” the Governor wants to maintain. That has already been acknowledged by legislators in adopting their budget plan.

To solve this crisis both the Governor and the Legislature must “pick their poison” as one lawmaker put it during the budget debate. All the more reason they would do well to heed Hanzalek’s advice and turn to a sunset solution.

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