Connecticut's Financial Sleight Of Hand
Let's Play Three Card Lamonty
Connecticut, known for its affluent enclaves and proximity to major economic hubs like New York City, presents itself as a beacon of prosperity and innovation. Beneath this veneer, however, lies a state plagued by fiscal manipulation, corruption, and economic messaging crafted to obfuscate the reality of its economic stagnation. Federal subsidies, cronyism, and quasi-Marxist agendas have coalesced into a system where financial mismanagement thrives under the guise of “progress”.
During the COVID-19 pandemic, the federal government injected massive relief funds into states, including Connecticut. Rather than utilizing these funds for one-time emergency measures, Connecticut absorbed them into its GENERAL OPERATIONS BUDGET. This temporary fix masked the underlying structural issues, allowing the state to defer painful decisions about spending reforms and tax structures. Federal funds have also been used to backfill failing programs or launch new initiatives without sustainable funding sources, creating a fiscal cliff as soon as the money runs out.
While bonds are a legitimate tool for funding long-term infrastructure projects, the state has frequently borrowed to cover operational expenses and debt payments. This practice is akin to using a credit card to pay off another credit card, creating a debt spiral that future generations will have to reconcile.
Governor Ned Lamont’s administration has utilized bond premiums—extra funds raised when bonds are sold at above-market interest rates—to create the illusion of balanced budgets. These premiums are essentially windfall gains, yet they are treated as recurring revenue streams in budget calculations. Such practices not only misrepresent the state's financial health but also set a dangerous precedent of fiscal irresponsibility.
Connecticut consistently ranks among the highest in per capita debt, a dubious distinction that underscores its inability to align spending with revenue. Residents are burdened with ever-increasing taxes to service this debt, which funds projects and initiatives that often fail to deliver promised returns. Remember the Route 11 Highway To Nowhere that began in the 1960’s but never got finished ?
Then there has also been the matter of the punitive public benefits surcharges passed along to the states residents. Surcharges, often labeled as public benefit fees, are ostensibly meant to fund renewable energy projects and other state-mandated initiatives. However, the costs are disproportionately borne by consumers, many of whom are already struggling with high utility bills. Eversource’s surcharges highlight a troubling trend in Connecticut: using private companies as de facto tax collectors to fund state priorities without directly raising taxes.
At the same time, Connecticut has opened its doors to outside contractors to buy up and develop properties under federally subsidized “affordable housing” programs. While affordable housing is an important goal, these developments often benefit large developers more than local communities. By relying on federal subsidies, the state creates an influx of projects that may not align with genuine economic growth. These developments frequently drive up costs for surrounding areas, burdening municipalities with additional infrastructure demands while delivering minimal long-term benefits to residents.
Connecticut's biennial budget for Fiscal Years 2024 and 2025 outlines appropriations for various state agencies, including those led by the governor's cabinet members. Below is a summary of the budgeted expenditures for key departments:
Total Appropriations:
FY 2024: Approximately $11.4 billion
FY 2025: Approximately $11.7 billion
These are the numbers as of the date of this publication. These figures are based on the state's biennial budget documents. For the most accurate and detailed information, please refer to the Connecticut Office of Policy and Management's budget publications.
Please note that these amounts are subject to change due to legislative adjustments, economic conditions, and other factors.
Connecticut's state expenditures have been increasing at a rate that outpaces its economic growth, as measured by Gross Domestic Product (GDP). This trend indicates a growing disparity between state spending and the state's economic performance.
State Expenditures:
Over recent fiscal years, Connecticut's state budget has seen consistent increases. For instance, the total appropriations rose from $24.5 billion in FY 2021 to $26.8 billion in FY 2024, marking an overall growth of approximately 9.4%.
Gross Domestic Product (GDP):
Connecticut’s purported economic growth in recent years has largely been propped up by government-funded contracts and initiatives rather than genuine, market-driven growth. While these contracts contribute to employment and GDP, they often represent a redistribution of taxpayer money rather than the creation of new, sustainable economic activity. Here’s how this dynamic works and why it’s problematic:
Connecticut opened its doors to outside contractors to buy up and develop properties under federally subsidized “affordable housing” programs. While affordable housing is an important goal, these developments often benefit large developers more than local communities. By relying on federal subsidies, the state creates an influx of projects that may not align with genuine economic growth. These developments frequently drive up costs for surrounding areas, burdening municipalities with additional infrastructure demands while delivering minimal long-term benefits to residents not to mention the transient nature of short term rental properties that inherently discourage people from engaging or being involved in community efforts & goals. This just underscores the broader issue: the state’s economic strategies prioritize short-term financial gains and external investments over sustainable, community-driven development.
Heavy Reliance on Government Spending
Public Infrastructure Projects: A significant portion of Connecticut’s GDP growth has been tied to state and federally funded infrastructure projects, such as road and bridge repairs. While these projects provide jobs and economic activity in the short term, they don’t necessarily stimulate long-term economic development or private-sector investment.
School Construction Grants: The state has poured millions into school construction, with questionable oversight, as evidenced by the Konstantinos Diamantis corruption scandal. Such programs can inflate GDP figures but don’t necessarily reflect sustainable growth.
Why It’s Problematic:
This type of growth is artificial, as it relies on taxpayer dollars or debt rather than market-driven demand or innovation.
When projects are completed, the economic boost disappears unless new government-funded initiatives are introduced.n contrast, Connecticut's real GDP growth has been modest. In FY 2022, the state's real Gross State Product increased by 4.0% after contracting in the previous two fiscal years. However, this growth has not kept pace with the increases in state spending.
Disparity Between Spending and GDP Growth:
The divergence between state spending and GDP growth suggests that expenditures are rising faster than the state's economic output. This growing disparity can lead to fiscal challenges, as the state's revenue generation may not be sufficient to sustain the increased spending without additional borrowing or taxation.
Connecticut's state spending per capita is among the highest in the United States. According to data from the Tax Policy Center, Connecticut's state and local general expenditures per capita were significantly above the national average.
Between 2000 and 2018, Connecticut experienced a substantial increase in per capita state spending. Adjusted for inflation, the state's per capita spending rose by approximately 49.04% during this period, placing it among the top ten states with the highest growth in per capita spending.
In comparison, the national average for per capita state spending increased by 25.58% over the same period. This indicates that Connecticut's spending growth outpaced the national trend, reflecting the state's commitment to funding various public services and programs.
It's important to note that these figures are adjusted for inflation, providing a real-term perspective on spending growth. The data highlights Connecticut's position as a state with relatively high per capita expenditures, which can be attributed to its extensive public services and programs.
Implications:
The increasing gap between state spending and GDP growth raises concerns about fiscal sustainability. If this trend continues, Connecticut may face budget deficits, leading to potential cuts in public services or the need for increased taxation, both of which can have significant socio-economic impacts.
To address this issue, it is crucial for policymakers to align state spending with economic growth. Implementing measures to stimulate economic development, such as investing in infrastructure, education, and business incentives, can help boost GDP. Simultaneously, adopting prudent fiscal policies to control spending growth is essential to ensure long-term fiscal health.
HOW CONNECTICUT “COOKS IT’S BOOKS” TO FEIGN GROWTH.
Selective Data Reporting
Focus on High-Performing Sectors: Highlighting the success of certain industries, such as finance or insurance, which are strong in Connecticut, while downplaying stagnation or declines in manufacturing or retail.
Cherry-Picking Metrics: Focusing on increases in GDP or personal income growth while ignoring rising costs of living, stagnant wages for lower-income groups, or wealth disparities.
Over-Reliance on Federal Stimulus
Boosting Growth with Temporary Funds: Counting one-time federal aid, such as COVID-19 relief or infrastructure funds, as part of sustained economic growth rather than recognizing it as a short-term injection.
Masking Underlying Issues: Using these funds to balance budgets or prop up failing programs without addressing structural weaknesses in the economy.
Additionally, Connecticut subsidizes the disparity between its high state spending and modest economic growth (GDP growth) through several mechanisms:
1. State Taxes
Income Tax: Connecticut has a progressive state income tax system, with higher-income earners contributing significantly to the state's revenue.
Sales Tax: The state levies a sales tax of 6.35%, which applies to most goods and some services.
Corporate Tax: Businesses contribute through corporate income taxes, though Connecticut has faced criticism for being less business-friendly due to high taxes.
2. Federal Aid
Connecticut receives significant federal funding for programs such as Medicaid, education, and transportation. These funds help offset some of the costs of state programs but are not always sufficient to close budget gaps.
3. Borrowing
The state issues bonds to finance long-term infrastructure projects and other capital expenses. However, reliance on borrowing increases the state’s debt burden and requires future generations to pay off these debts with interest.
Connecticut consistently ranks among the states with the highest per capita debt.
4. Pension Obligations and Deferrals
Connecticut has significant unfunded pension liabilities. To manage these, the state has historically deferred full pension contributions or used refinancing strategies to manage cash flow.
While these measures provide short-term relief, they exacerbate long-term fiscal challenges.
5. One-Time Revenue Sources
The state occasionally relies on one-time revenue sources, such as settlements, asset sales, or tapping into reserve funds ("Rainy Day Funds"), to balance the budget.
For example, Connecticut has drawn from its Rainy Day Fund in previous years to address budget shortfalls.
6. Quasi-Public Entities
Connecticut relies on quasi-public agencies (e.g., the Connecticut Housing Finance Authority, Connecticut Innovations) to fund and manage certain programs. These agencies often generate revenue independently but may still receive state support.
7. Tax Policy Adjustments
Adjustments to tax credits, exemptions, and deductions allow the state to increase revenue without directly raising tax rates. However, such measures can disproportionately affect certain populations and may deter businesses from investing in the state.
8. Cost-Cutting Measures
Periodically, Connecticut has implemented austerity measures, such as cutting public services, reducing workforce numbers through attrition, and renegotiating labor agreements.
Overlaying Connecticut’s fiscal mismanagement is a broader ideological shift toward quasi-Marxist policies that prioritize equity and redistribution over growth and innovation. While addressing inequality is a noble goal, the state's approach often leads to unintended consequences that exacerbate the very problems it seeks to solve.
Progressive taxation policies, including some of the highest income and property taxes in the nation, aim to redistribute wealth but have driven many high-income earners and businesses out of the state. This exodus shrinks the tax base, placing an even greater burden on middle- and lower-income residents. The result is a vicious cycle: higher taxes chasing away the wealthy, leaving the state with fewer resources to address the root of the problem.
The time for games has come to an end.
SOURCES:
https://portal.ct.gov/opm/bud-budgets/2024-2025-biennial-budget/fy-2024-2025-biennial-budget?utm_source=chatgpt.com
https://www.cga.ct.gov/ofa/Documents/year/BB/2023BB-20231005_FY%2024%20and%20FY%2025%20Connecticut%20Budget.pdf
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https://casetext.com/case/bagnaschi-v-state