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Crowding Out What Matters

The Connecticut budget is on autopilot – and no one’s at the wheel. State government grows more expensive each year because of expensive promises to state employees and endless borrowing.

A half-billion dollar increase in spending doesn’t even cover the growth in these two areas. “We’re in the alarming position of spending a half billion more but cutting services,” said Carol Platt Liebau, Yankee Institute president.

The Yankee Institute urges the General Assembly to adopt a budget that does not raise taxes and respects the spending cap. State leaders also need to begin reforming our state workforce to make it more flexible and more affordable.

“It’s wrong for politicians to make promises they can’t keep. Connecticut’s government has made too many promises for too long. Soon it will be impossible to keep them. We need to begin the difficult but essential process of changing our approach,” Liebau said. “Our budget is on autopilot. Citizens must demand that their leaders regain control. Connecticut can do better.”

The latest Yankee Institute policy brief, Crowding Out What Matters, suggests a number of ways to balance the budget while increasing the value of each taxpayer dollar spent.

Create jobs. Instead of passing distracting tax cuts, we should focus on helping employers hire. Eliminate the business entity tax and end the corporate surcharge.

Help people in need. Improve the earned income tax credit. Cancel cuts to Medicaid providers.

Improve quality of life by ending traffic nightmares. Use tolls or congestion pricing to pay for transportation projects while reducing other taxes. Cancel the $1+ billion New Haven to Springfield rail line planned for just 3,500 people.

Cut unnecessary spending. Reduce “phantom student” grants by 10 percent. Bill agencies for 5 percent of fringe benefits. Increase cost-sharing for state employee health insurance.

Take the budget off autopilot. Delay all bonding by six months. Create a severance fund to cover the cost of state-employee layoffs. End cost-of-living increases for state retirees who earn more than the median income.

Crowding Out What Matters

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Fix Metro North Before Expanding to Springfield

The Yankee Institute supports HB 5949, which would require the Department of Transportation commissioner to prioritize projects, and to put repair of existing infrastructure ahead of building new projects.

Clearly our state has infrastructure needs that must be addressed, and we support this committee’s efforts to find ways to fund those infrastructure needs in a responsible way and in a way that does not increase the overall tax burden on Connecticut residents.

We are particularly concerned with the state’s $365 million project to develop new infrastructure along the New Haven to Springfield rail line.

This project will connect new commuters to the Metro North rail line, which is already overburdened and under-maintained.

According to our Department of Transportation’s own projections, at its maximum the Hartford rail line is expected to carry under 3,500 passengers per day. Under this scenario, the state will have spend millions every year in tax dollars just to maintain the rail line and other infrastructure, with receipts from fares projected to cover only 10 percent of the operating costs.

Meanwhile, the estimated 150,000 daily commuters who use the Metro North rail line are frustrated as they deal with significant delays and poorly maintained infrastructure.

We ask committee members to use existing transportation dollars wisely. We ask you to find better ways to prioritize the spending of transportation dollars, and to carefully consider how much more debt to add to the state’s already-high debt burden.

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Solar Proposal Complicates a Simple Problem

The Yankee Institute is pleased Gov. Malloy and his administration have recognized the failures of Connecticut’s RPS mandates in proposing the Solar Home Renewable Energy Credit. The RPS mandates increase the cost of electricity and create jobs in other states.

“Instead of reducing Connecticut’s electricity costs, second highest in the country, this proposal further complicates energy policy. Now in addition to ZRECs, LRECs and the RSIP we have SHREC,” said Zachary Janowski, Yankee’s director of external affairs. “The real solution is much simpler. Pass H.B. 6026 and put these expensive mandates on hold.”

Last month, the Yankee Institute released a study, Restoring Power, highlighting the General Assembly’s ability to reduce electricity costs with a simple change. We’ve lost control of our electricity bills, but if legislators take action they can put money back in the pockets of homeowners and employers. That’s the best way to create jobs in Connecticut.

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State Would Have $5.2 Billion More Under Spending Cap

Connecticut would have $5.2 billion more in its rainy day fund if lawmakers had kept spending under the state’s constitutional spending cap, according to a new Yankee Institute policy brief.

The Yankee Institute is urging Gov. Malloy and state legislators to honor the cap in the next two-year budget, which will be released in February.

“This budget needs to be the first step toward a sustainable government and fairness for taxpayers. Lawmakers can accomplish these goals by getting state spending under control,” said Carol Platt Liebau, president of the Yankee Institute. “The spending cap is an important – and popular – feature of our government. A good government needs boundaries”

The spending cap was implemented in 1991, the same year the state adopted an income tax. Since 1991, state spending has nearly doubled while Connecticut’s population has only gone up 10 percent.

“Our research shows that if the state had adhered to the spending cap, we could have had a substantial rainy day fund in place before the start of the 2008 recession,” said Suzanne Bates, Yankee Institute’s policy director and author of the study. “Because we didn’t save when we had the chance, we were unprepared when financial disaster hit.”

Instead of slowing the growth of state government expenditures, lawmakers implemented a tax hike in 2011 that slowed the state’s recovery from the recession. Economic growth in Connecticut has lagged the national rate every year since 2008.

Now the state is facing deficits of $1.3 billion and $1.4 billion for fiscal years 2016 and 2017. Lawmakers need to close these gaps by cutting the cost of state government, instead of further burdening Connecticut’s citizens.

The recent mid-year cuts to state government show that last-minute decisions leave us with fewer options. The responsible approach is to make structural changes to prevent future cuts from hurting those most in need.

The spending cap policy brief is the first in a new series of policy briefs that the Yankee Institute will publish in order to address the ways Connecticut can get its economy moving again so every resident has an open road to opportunity.

Sustainable Spending: Respect the Cap by Suzanne Bates

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Bottom 10 yet again

Connecticut in Bottom 10 For Business Tax Climate

Other states, like New York, enacting significant tax reform

EAST HARTFORD – While other states are starting to initiate significant tax reform, Connecticut still has not done anything to make its tax climate more business-friendly, despite its placement at the bottom of several rankings and its slow economic growth.

Today the Tax Foundation released its 2015 State Business Tax Climate Index. Connecticut was ranked 42nd out of the 50 states.

“Connecticut loses too many jobs to other states because of its high-tax environment,” said Carol Platt Liebau, president of the Yankee Institute. “We want our children to stay and work in Connecticut, but if our policies keep driving businesses to other states, there just won’t be enough jobs here.”

“With elections just one week away, it’s important for candidates to explain exactly how they plan to improve the economy and create jobs through better tax policy,” Liebau said. “The example of North Carolina shows this can be done.”

Several states enacted significant reform this year. North Carolina was able to change its ranking from 44th place last year to 16th place this year because of the tax reform it enacted, including adjustments to its personal income tax and corporate income tax rates and structure.

Here Comes New York

Although New York is still ranked 49th, its ranking is expected to improve in the coming year because of tax reform enacted there last year. Gov. Andrew Cuomo received an award this year from the Tax Foundation for the state’s efforts. However, those reforms were not all included in this year’s business tax rankings because they have not all gone into effect. New York’s corporate income tax rate, once fully enacted, will drop to 6.5 percent, among many other significant changes.

“Here comes New York,” Liebau said, “and Connecticut had better watch out. Up until now, our state has benefited from the many New York firms who came here for a slightly friendlier business climate.  With New York’s reforms, this ‘free pass’ may be coming to an end.”

High Taxes Across the Board

Although state officials like to claim that the state has a friendly business tax environment because of its 7.5% corporate income tax rate, which places it about in the middle of other states, our state’s very high property taxes and relatively high taxes across the board account for Connecticut’s rank toward the bottom.

Other factors that affected the state’s placement include:

  • Connecticut has the second highest per capita property taxes in the nation;
  • The state levies sales taxes on many business-to-business transactions;
  • Several other states don’t have at least one of the major taxes (corporate income tax, personal income tax, sales tax), which significantly improves their ranking;
  • We are worst in the nation for our capital stock tax rate, which is a tax on business wealth;
  • We are the only state with a gift tax, which significantly effects small businesses;
  • Our alternative minimum tax for personal income taxes is also detrimental to small businesses, many of which are taxed at the personal income tax rates.

The study also says that business incentive programs do less to help states attract and retain businesses than an overall business-friendly tax environment.

In other words, it is better to have a long-lasting business-friendly tax structure than to have short-term programs like Connecticut’s First Five program.

The study notes that companies are more likely to move from one state to another than from the United States to foreign countries. As a result, Connecticut’s low ranking compared to other states makes it difficult to remain competitive and attract jobs.

The study is here: http://taxfoundation.org/article/2015-state-business-tax-climate-index

The Tax Foundation’s press release is here: http://taxfoundation.org/sites/taxfoundation.org/files/docs/Connecticut-Ranks-42nd-Best-on-Business-Taxes.pdf

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Study: Kids in Connecticut are Born Broke

Kids in Connecticut are born broke – more than $27,000 in debt – because of billions in unfunded pension promises. State estimates suggest citizens owe $25 billion, but this Yankee Institute study found the real number is more than three times higher, $76.8 billion.

The state owes another $22.7 billion to cover retiree healthcare costs. To pay for these promises, Connecticut needs a plan. One solution would require raising taxes by nearly $1,500 per family, which could severely damage the economy.

Instead, the study recommends adopting defined-contribution plans – much like a 401(k) – for new state workers as soon as possible.

Read a summary of the study here.

Born Broke Full Study

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2013 Pension Data Added to CT Sunlight

EAST HARTFORD – The retired state employee with the largest pension benefit in 2013 was former Professor John Veiga, who received $283,273 according to new data compiled by the Yankee Institute for Public Policy for its online transparency database CTSunlight.org.

Veiga has had the largest pension benefit in the state since 2009.

Retiree Last Position Last Agency

2013 Pension Benefit

Veiga, John Professor UConn

$283,273

Blechner, Jack UConn Health Center

$278,342

Henken, Eleanor UConn Health Center

$246,900

Blanchette, Edward Corrections

$232,325

Hartley, Harry Professor UConn

$216,944

Judd, Richard Central Connecticut State University

$213,544

Sigman, Eugene UConn Health Center

$210,483

Dibenedetto, Anthony Professor UConn

$209,702

Raye, John UConn Health Center

$205,612

Cutler, Leslie UConn Health Center

$203,276

The entire list of state employees and calendar year 2013 pension amounts is available at CTSunlight.org.

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Malloy the 1,379th Highest Paid State Employee

EAST HARTFORD – Gov. Dan Malloy was Connecticut’s 1,379th highest paid state employee in 2013 according to new data compiled by the Yankee Institute for Public Policy for its online transparency database CTSunlight.org.

The Governor’s salary is set by state statute at $150,000. There were 1,378 state employees who received gross pay in excess of $150,000 for calendar year 2013. A list of all 1,379 employees paid more than $150,000 is available here (xlsx).

A total of 8,309 state employees were paid more than $100,000 in 2013. The state paid 62,680 full or part-time employees last year.

Among the top ten highest paid state employees in 2013, all were associated with UConn or the UConn Health Center. As in many states, high profile coaches are the state’s highest paid employees.

Calendar year 2013 marked the first year that Geno Auriemma was the state’s highest paid employee since Yankee started the CTSunlight.org database in 2009. UCONN Men’s Basketball Head Coach Jim Calhoun was the highest paid state employee in 2009, 2010, 2011, and 2012.

Employee Position Agency/Institution

2013 Gross Pay

Auriemma, Geno Women’s Basketball Head Coach UConn

$1,992,430

Pasqualoni, Paul Football Head Coach UConn

$1,629,134

Calhoun, James Men’s Basketball Fmr. Head Coach UConn

$1,485,614

Makkar, Hanspaul Chief, Division of Pediatric Dermatology UConn Health Center

$1,194,440

Ollie, Kevin Men’s Basketball Head Coach UConn

$1,182,984

Onyiuke, Hilary Chief, Division of Neurosurgery UConn Health Center

$940,676

Torti, Frank Dean, UCONN School of Medicine UConn Health Center

$931,066

Nulsen, John Director, Center for Advanced Reproductive Services UConn Health Center

$907,976

Whalen, James Director, Dermatologic and Mohs and Laser Surgery UConn Health Center

$903,238

Herbst, Susan President UConn

$616,495

The entire list of state employees and calendar year 2013 compensation amounts will soon be available at CTSunlight.org.

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Milton Friedman Day School Choice Lecture

Friedman Day

Yankee Institute Chairman Rob Simmons with the Cato Institute’s Jason Bedrick on July 31, 2013 (Credit: Heath Fahle)

The Yankee Institute honored the legacy of Dr. Milton Friedman on Wednesday, July 31 with a luncheon and policy discussion led by Jason Bedrick of the Cato Institute.

The New Britain Herald’s Scott Whipple called the event the best free lunch in central Connecticut.

Mr. Bedrick, the Director of the Center for Educational Freedom at the Cato Institute, spoke to a packed house about the merits of school choice, one of Dr. Friedman’s signature issues. His presentation is available here.

In his presentation, Bedrick highlighted the high cost of educating pupils in Connecticut, noting the deceptive practice of calculating per pupil spending based only on operating expenditures rather than total expenditures which would include capital investments, pension benefits, and other costs. Using this more accurate measure, he revealed that Connecticut’s average total cost per pupil is actually $17,500, $3,500 higher than the national average.

Bedrick, a graduate of Harvard’s Kennedy School of Government, also pointed out that public education advocates in ten states claimed that per pupil spending was 49th out of 50 in 2012.

He also unveiled new research about the transparency of state education departments in reporting public school spending. In Cracking the Books, Bedrick graded the quality of publicly available data as an “F-“, ranking Connecticut as 43rd in the nation on this measure.

Before a lively question and answer period, Mr. Bedrick suggested the benefits of a robust school choice program in Connecticut. The benefits would include:

  • Save money
  • Improve student performance
  • Raise graduation rates and college matriculation
  • Improve civic knowledge

For more information about Jason Bedrick or the Center for Educational Freedom at the Cato Institute, visit the Cato Institute or follow him on Twitter @JasonBedrick.

2013 Yankee Institute Friedman Day Presentation

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Too Small to Keep

Connecticut collects revenue from at least 371 unique sources of revenue, but the bottom 200 don’t even produce 1 percent of total state revenue. Are these really worth keeping? Yankee examines the issue in Too Small to Keep.

The research from the Yankee Institute reveals that most state agencies actually have no idea how much it costs them to collect taxes and fees. But they keep on collecting them.

Yankee recommends that the General Assembly require the administrative costs of tax collection be calculated by agencies and included in the Results-Based Accountability reports that most state agencies submit to the General Assembly. We also recommend the inclusion of sunset clauses in all revenue-raising legislation to force the General Assembly to review and renew revenue sources on a periodic basis.

Too Small to Keep

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