Arguably, the primary lesson of the Connecticut General Assembly’s 2024 session is the need for legislative reform of structural fiscal impediments undermining vital public services. National AAUP Vice President Rotua Lumbantobing, (right, in photo above) and Brendan Cunningham (left), the treasurer of our affiliated CSU-AAUP, proposed a proven approach in a recently published opinion editorial. Together they urged state lawmakers to “move beyond survival mode” and take action to drive long-term economic growth and stability through progressive taxation:
In Connecticut, you hear a lot about “fiscal responsibility,” “fiscal guardrails” and “living within our means.” When Governor Ned Lamont uses these terms, what he really means is fiscal irresponsibility, with 12 multibillionaires paying the lowest tax rates while 3.6 million of us confront a huge tax burden in exchange for fewer and fewer public goods and services.
Meanwhile, the state remains saddled with outdated promises to Wall Street while we face dismal child poverty rates, and historic cuts to our poorest public school districts that only face more challenging months to come.
Click here for press reporting on Connecticut’s ranking in the Annie E. Casey Foundation’s 2023 “Kids Count” survey.
From all appearances, a small handful of operatives in the executive branch lack the political will to make the transformative fiscal shifts required to fix these wrongs.
What real fiscal responsibility looks like is when big corporations and people like Lamont pay their fair share in taxes while we use that revenue to invest in public goods that grow the state’s economy, promote social mobility, and benefit the people that the governor serves.
Our neighbors to the north have done exactly that: they found a solution to the seemingly unsolvable issue of sustainable funding for public education and transportation infrastructure by implementing a more just, progressive tax policy. Massachusetts’ “Millionaires Tax,” a 4% income surtax on earnings over $1 million, has far exceeded expectations, generating $1.8 billion in the first nine months of the fiscal year.
Click here for an analysis of the policy from the Center for State Policy Analysis at Tufts University.
This windfall is directed towards essential public services, with significant portions earmarked for education and transportation, two investment areas known for their strong return on investment. The success of this tax has also generated substantial revenue without driving away wealthy residents.
The outcome of this tax is immediate and beneficial. The revenue has already funded public college scholarships, universal free school meals and infrastructure upgrades. Critics who predicted a mass exodus of millionaires have been proven wrong, as the state continues to thrive economically while making critical investments in its future.
Click here for A Better Connecticut Institute (ABCI)’s report busting the “millionaire migration” myth.
Conversely, Connecticut’s fiscal policy is hamstrung by the so-called “fiscal guardrails” – including most notably the spending and volatility cap. These measures, initially intended to promote fiscal responsibility, have in fact stymied the state’s ability to utilize surplus revenue for meaningful investments in public services. Despite this year’s $1 billion surplus, Connecticut faces severe underfunding in higher education and other essential services. The spending cap, in particular, prevents the legislature from using existing surplus revenues to bolster programs that could benefit residents and reduce long-term service needs and, in turn, reducing future reliance on public services.
Governor Lamont’s stringent adherence to these fiscal policies has manufactured a crisis of public service disinvestment. The state’s inability to invest in higher education, for example, has led to a system that is deeply underfunded, affecting the quality and accessibility of education for many residents (Lumbantobing is associate professor of finance in Western Connecticut State University’s Ancell School of Business and Cunningham is professor of economics and finance at Eastern Connecticut State University).
This stands in stark contrast to Massachusetts, where surplus revenue is used to enhance educational opportunities and infrastructure, driving long-term economic growth and stability.
Click here for another CSU-AAUP leader’s recently published commentary on the impediments’ harms to students in higher education.
The volatility cap, which supposedly targets only fluctuating revenues, has diverted approximately $8.4 billion over six years from potential investments. This cap captures “excess” revenues, which have averaged $1.4 billion yearly, including over $530 million during the pandemic’s first year. These funds, if invested in Connecticut’s people and communities, could have spurred broad-based economic growth and increased future revenue.
Research consistently shows that investment in core services fosters more resilient economies and communities than austerity measures. Yet Connecticut’s fiscal caps, based on outdated formulas from 1991, fail to consider the current and future needs of its residents. They exacerbate economic and racial inequities, locking in patterns of injustice rather than addressing them.
Massachusetts’ approach illustrates the benefits of expecting the ultra-wealthy to pay their fair share in order to fund critical public services, creating a more equitable and thriving state. Connecticut, a state with substantial wealth, can and should adopt similar strategies. But the fiscal guardrails, initially intended as a safeguard, have become a hindrance, preventing the state from leveraging its wealth to benefit all residents.
Click here for current reporting on the impediments’ unpopularity with voters.
It’s time for Connecticut to redefine success. The state must move beyond survival mode and embrace a model that prioritizes investment in public services, fostering economic growth and improving the quality of life for all its residents. Connecticut is one of the worst states in the nation for inequality. To move our state forward, we must reform our fiscal policies, thereby allowing for greater flexibility in utilizing surplus revenues. Only then will Connecticut create a more just and prosperous future.
The lesson from Massachusetts is clear: progressive taxation works. By taxing the ultra-wealthy and reinvesting in public services, states can generate significant revenue and drive long-term growth.
Connecticut has the wealth and the potential to follow this path. It’s time to dismantle the fiscal guardrails and build a Connecticut for all.
Click here for Lumbantobing and Cunningham’s original published op-ed at CT Viewpoints.
