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Jobs & the Economy, Taxes & Government Spending

Fact Check of Gov. Malloy's State of the State Address

  • Jan 10, 2013
  • by Ben Zimmer
Fact Check of Gov. Malloy's State of the State Address

Governor Malloy’s 2013 state of the state address included assertions about Connecticut’s budget and economy that were, to say the least, dubious.  Here is a fact-check of his most questionable claims:

1. Gov. Malloy: “Through a restructured benefits and pension agreement with our public employees, we’re saving the state approximately 20 billion dollars.”

FACTS: According to the General Assembly’s Office of Legislative Research and the most recent actuarial reports, Governor Malloy’s 2011 deal with the state employees’ union saved the state only $1.7 billion in pension obligations and $4.94 billion in benefit obligations.  This amounts to $6.64 billion in savings, only a third of the Governor’s stated savings and a less than ten percent reduction in Connecticut’s unfunded liabilities.  Even after these savings, Connecticut still has more than $60 billion of unfunded liabilities.  When combined with the state’s $20 billion in bonded debt, this is more than $80 billion of total state debt – the third highest per capita in the country.  

2. Gov. Malloy: “That's why last year we restructured our payments to reverse years of chronic underfunding.  We’re avoiding our own fiscal cliff and saving Connecticut taxpayers 6 billion dollars over the next 20 years.”

FACTS: Gov. Malloy is referring here to his plan for Connecticut to increase state contributions to its pension funds between now and 2023 so that it can pay less between 2023 and 2033.  Gov. Malloy is touting the reduced payments between 2023 and 2033 but he conveniently leaves out that these “savings” will be offset dollar for dollar (when accounting for the time value of money) by increased expenses in the next ten years.  

3. Gov. Malloy: “By investing in growth industries like bioscience and digital media, by recruiting companies like Jackson Laboratory and NBC Sports, and by standing with our small businesses and start-ups, we’re taking steps to make sure that Connecticut leads the way.”

FACTS: Connecticut’s job growth in the last two years has lagged far behind the U.S. as a whole and neighboring states.  Our unemployment rate is a full point higher than the national average, and Connecticut has 20,000 fewer residents employed than when Gov. Malloy took office. Readers can decide for themselves on whether this amounts to “leading the way” on job creation.

About the Author: Ben Zimmer is the Executive Director of the Connecticut Policy Institute

Jobs & the Economy, Taxes & Government Spending

Budget Passes

  • May 10, 2012
Budget Passes

The General Assembly as agreed on a new $20.5B budget for the upcoming fiscal year.   The budget occurs against the backdrop of the previous fiscal year ending with a $200M deficit, in spite of the largest tax increase in the state’s history. 

The budget deals with this deficit by borrowing against Connecticut’s long-term debt obligations, which exceed $60B.  The budget also includes $143M of net additional spending for the upcoming fiscal year.  Many commentators have expressed concern that this will lead to further deficits going forward.

Meanwhile, the state's actual deficit based on Generally Accepted Accounting Principles (GAAP) is roughly $1.7B, and the budget delays a promised transition to transparent GAAP accounting.

Jobs & the Economy, Taxes & Government Spending, Government Administration

State to Review Tax Incentives Policy

  • Jan 13, 2012
State to Review Tax Incentives Policy

On Thursday, Governor Malloy signed an executive order creating a nine-person panel to review the effectiveness of tax credits in creating jobs. Interestingly, Governor Malloy's own $900 million jobs bill passed last year was focused largely on these very sort of tax incentives.

The taskforce, called the Governor's Business Tax Policy Review Taskforce, comes at the urging of state Comptroller Kevin Lembo.  Several Connecticut politicians have been calling for such a review for some time.

In the CPI's recent policy paper on Connecticut Job creation, the Institute lays out a three-part test for assessing whether job-creation tax incentives are good policy.  The CPI is skeptical of most targeted job creation tax incentives, instead prefering a holistic set of state policies conducive to economic activity and organic job growth.   

Reports differ on how Connecticut's total business tax burden compares to other states.  The Council on State Taxation ranks Connecticut has having among the lowest total effective tax rates for businesses.  But the Tax Foundation ranks Connecticut as having among the worst state business tax climates.  The differences can be accounted for in different metrics used to measure tax burdens.

What are your opinions on Connecticut's current business tax policy? Is heavy reform in order?  And if so, what should reform entail?