For CT's fiscal rules to work, we need to responsibly modify them

In 2017, Connecticut was at a crossroads: faced with years of deficits, tax increases, and mounting long-term debt, the state decided to create “fiscal guardrails,” a set of budget and bonding rules that cap state spending and revenue by redirecting budget surpluses to reduce debt. As highlighted in a recent joint report by The Connecticut Project and Yale University's Tobin Center for Economic Policy, the fiscal rules have been pivotal in stabilizing Connecticut's finances in some areas, such as rebuilding the Rainy Day Fund, reducing pension liabilities, and bolstering Connecticut's reputation for fiscal discipline. 

But there is more to fiscal responsibility than debt payments and savings, and we’re at another pivotal moment. Working people in Connecticut are facing a cost of living crisis, federal pandemic relief money is running out, and our budget increasingly relies on short-term fixes and opaque tricks to fund critical programs and services. We’ve got to responsibly, thoughtfully modify the guardrails, and the good news is there are several data-driven options for the legislature and governor to do so.

There is no doubt that the fiscal rules helped stabilize state finances. But unless lawmakers responsibly modify the fiscal rules, our state is going to be unable to address the budget cliff and fund important programs and services.

As our recent report shows, the state has been able to save money while avoiding the guardrails’ full consequences in part due to unprecedented federal pandemic funding. Relief programs such as the CARES Act and the American Rescue Plan Act (ARPA)  infused billions into the state. This influx of federal dollars temporarily supported critical state programs and services, which masked some of the fiscal rules’ limitations. Now, with federal aid phasing out, Connecticut faces a looming budget cliff. 

Meanwhile, working people are facing a cost of living crisis in our state. With 40 percent of Connecticut adults struggling to make ends meet and food and financial insecurity increasing by 25 percent and 50 percent since 2015, people are hurting. Families with young children are trying to navigate a child care crisis, while all residents are facing growing demands on health care, education, and home energy, just to name a few.

The fiscal rules are too rigid, forcing the state to make false choices between debt payments and meeting pressing needs. Under the current fiscal rules, Connecticut has struggled to strike the balance between paying down debt and funding important programs and services without the support of unprecedented federal funds.

They also incentivize the state to use budget tricks such as revenue captures and carryforwards — workarounds that lack transparency and fail to address the deeper issues. These tactics favor special interests and flashy new projects, leaving working people to bear the brunt of a government that fails to deliver on what it has promised to do. 

Adjusting the fiscal rules to allow targeted, strategic investments in essential areas is the very definition of fiscal responsibility. By evolving the guardrails, lawmakers can ensure that the state focuses on what matters most and delivers it effectively.

After all, state government isn't a business. Its job isn’t to hoard cash — it’s to deliver for its people. Ensuring that people have access to the things that matter most, including childcare, schools, healthcare, and warm homes in the winter, is critical work, but our state is in deep danger if we fall off the looming fiscal cliff. And we know that when core services go underfunded, the people who rely on them most are hurt worst and first.

To me, there is no question that we should keep the guardrails. We’re never going back to a time of boom-and-bust budget cycles. The real question is how our state should adapt the fiscal rules to balance savings and debt payments and our state’s current and future needs.

The research shows that Connecticut has options to update the fiscal rules, allowing our state to invest strategically in essential services without compromising fiscal stability. Governor Lamont and the Legislature need to responsibly and carefully adjust the fiscal rules using data and evidence, instead of carrying forward policies from a previous legislature and governor. 

Connecticut doesn’t have to choose between a balanced approach that retains fiscal discipline and ensuring flexibility to invest in core responsibilities. Responsible, thoughtful, and evidence-based fiscal rules will ensure that state government works for everyone, especially working class people. Fiscal responsibility isn't just about maintaining the state's finances; it's about ensuring those finances serve their full purpose.

At this pivotal moment, evolving the guardrails is the responsible and necessary step forward.

This piece originally appeared on December 20, 2024, in Hearst Connecticut newspapers.