Unlike the federal government, Connecticut must balance its state government every year. We can’t run a deficit. This is part of a package of reforms put into place after the fiscal crisis of the early 1990s (although another of those reforms, the spending cap, has been ignored by governors and legislators both).
Rep. Andrew Fleischmann (D-West Hartford) wants to change that by requiring the budget to balance every ten years, instead of every year. The idea is that the business cycle is usually ten years in length, and that a longer budget term would allow for more flexibility within that business cycle. Here’s his argument, published in the Sunday Courant:
If you believe it makes sense for government to stimulate the economy to help reduce the severity of the current downturn, then — whether you’re a groundskeeper, gas station owner or governor — you should join me in pushing Connecticut to alter its constitutional requirement to balance the state budget each fiscal year.
Many people believe that cuts in critical services and investments like the resident state trooper program and school construction must be made to keep the budget in balance. This requirement — in place since the state fiscal crisis of 1991 — drives Connecticut to cut expenditures and/or increase taxes at the precise moment when sound economic policy demands the opposite.
That’s why I introduced legislation requiring state government to balance its budget over the course of the 10-year business cycle — not in a single fiscal year. This simple change will allow our state to pursue policies that reinforce — rather than undermine — the recently enacted federal stimulus plan.
Fleischmann would, after cutting unnecessary services, have the government issue what he calls “economic recovery notes” to cover the cost of deficits, which would then be repaid as the economy improves: neatly eliminating the need for further spending cuts or tax increases.
It’s an interesting sort of middle way between the competing ideologies of slashing services and other spending (often at the expense of the poor) or raising taxes (usually on the wealthy), which would result in a balanced budget at the end of the ten years. Of course, the risk is that the government might be hard-pressed to repay the notes if the economy stays sour, or the notes represent a very large sum of money.
Crises are good things in that a lot of ideas that never otherwise would have seen the light of day emerge, and people are more willing to consider all possible solutions. I don’t know if this is a workable solution, I’d have to know more about how it would work, but it’s certainly worth thinking about.