Malloy: Tax Hikes Can’t Be Ruled Out in Next Budget

HARTFORD, CT— Gov. Dannel Malloy and the state legislators have the unenviable task of figuring out how to plug a projected $1.3 billion budget hole for the 2017-2018 fiscal year. Malloy spoke at a Tuesday press conference mostly about the state’s budget situation. When asked if he would propose raising taxes, he replied, “Am I leading with expectation that we’re going to raise a lot of additional dollars, then no.”

Malloy’s approval rating has gone down to 24 percent, according to a summer Quinnipiac University Poll.

Malloy said he envisions “more deep spending cuts” will be needed to balance the budget but left the door open that the state may need to raise taxes too, according to WTNH News 8. More than 1,000 state employee positions were already eliminated in an effort to plug deficits last year and this year.

The governor said that many people don’t understand that his administration is trying to fix 70 years of state pension mismanagement.

“I don’t think people understand the lack of paying the bills as they should have been paid has led to current difficulties that State of Connecticut has been dealing with,” he said.

Malloy noted the state employee pension plan was 42 percent funded when he took office.

“I get blamed for tax increases, who should get blamed, my predecessors,” he said.

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Connecticut operated a pay-as-you-go pension system before 1984 where pensions were paid right out of the annual budget, according to the Connecticut Mirror. That decision didn’t allow the state to save for a time where pension obligations would be greater, and it cost the state missed opportunities to reap the benefits of investment earnings. Between 1984 and 2010, pension contribution benefits were reduced to ease budget situations.

Senate Republican Leader Len Fasano said the latest report from the Office of Policy Management that shows a $1.3 billion projected deficit only funds the bare bones of the budget and doesn’t take into account inflation and promises made to municipalities and private providers, according to the Connecticut Mirror.

The State Employee’s Retirement System received a $447 million pension contribution from the state in fiscal year 2006 compared to an estimated $1.124 billion contribution for fiscal year 2017, according to OPM.

The teacher’s pension account received about $396 million in fiscal year 2006 and will receive more than a billion dollars for fiscal year 2017.

Non-fixed costs grew at an annual rate of 3 percent between fiscal years 2006 and 2011 and only grew at 0.8 percent between fiscal years 2011 and 2017. Malloy became governor in 2011.

While Connecticut’s immediate budget woes will prove challenging, state officials face the dreaded 2032 “pension cliff” if a solution isn’t found. A $6.65 billion annual contribution would have to be made to state pension accounts for unfunded liabilities.

The current total state budget is about $19.7 billion. Malloy said this is the year where Connecticut has to zero in on the problem by raising pension contributions. The sooner that happens the flatter future pension contributions will be, he said.

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