The Connecticut Budget Crises

November 21, 2012

I think that the looming Connecticut budget crises is a bit scary. I am a bit too tired to process the entire report that the CT Mirror linked to from the Office of Fiscal Analysis but skimming it one thing stands out at me: tax collections are less than expected. The Mirror also explains that enrollment in Medicare is higher. Whenever the governor and legislature put together a budget they are playing a guessing game. They can set tax rates for the future but they do not know how much revenue it will create until it actually occurs. Spending on these social insurance programs is not certain either. The accountants and economists have methods to predict what these might be, but these are always subject to uncertainty. That is why we are left with a gap: the guess was different from the actual revenues or expenditures.

Governor Malloy has suggested that tax increases are off the table. This means there will be spending cuts. What we do not yet know are what these spending cuts will be nor their impact on the economy. When we entered this recession years ago I thought we would be in a recovery by now. Unfortunately we are crawling out inch by inch instead of being lifted out by a rising tide.

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