It is no secret that Connecticut’s fiscal condition is one of the worst in the country, but a new report by J.P. Morgan shows just how bad: Connecticut spends 20% of state revenues on debt service and payments into retirement funds for state workers – higher than any other state in the country. The chart below, reproduced from the report, has the details.
In spite of these large payments, Connecticut is not even close to fully funding its long-term debt obligations because those obligations are so large to begin with. As the J.P. Morgan chart below shows, fully funding our debt service and retiree benefit funds would cost just under 40% of the state budget, higher than every other state except Illinois.
Economic growth requires reasonable tax rates and a government that uses tax revenues to invest in the future. Until Connecticut gets its debt service and retiree benefit spending under control, it will have neither reasonable tax rates nor prudent government investment. Instead, we will see more of the same -- tax increases that don't address our underlying fiscal problems, and budgetary gimmicks that kick the can down the road. The legislature’s non-partisan Office of Fiscal Analysis (OFA) recently projected a $2.8 billion budget deficit for the fiscal biennium that begins next year, in spite of the state's $2.6 billion tax increase in 2011.
Several of the CPI’s policy papers include recommendations on how to end reckless borrowing and bring our retiree benefit costs in-line with more affordable standards.
CT Jobs Recovery Continues to Lag Nation
The most recent national jobs report generated attention for the fact that the U.S. non-farm employment has returned to its pre-recession levels. Largely because our high taxes are going towards legacy costs rather than investment in the future, this jobs recovery has passed Connecticut by. As the CPI chart below shows, Connecticut has regained only 55% of the nonfarm jobs lost during the last recession, and our pace of recovery has slowed. In 2011, CT non-farm employment grew by 1.18%, while in 2013 it grew by only 0.21%.