State employees in Connecticut are bracing for the growing likelihood of layoffs as lawmakers struggle to close the state’s $922 million budget deficit.
As The Wall Street Journal reported, Gov. Dannel Malloy announced his latest budget proposal, which includes severe cuts to state services and hundreds of layoffs. The administration has already begun sending termination notices to some departments, including the Department of Children and Families and Department of Mental Health and Addiction Services, which collectively saw 165 positions eliminated in the days following Malloy’s announcement. Malloy said more layoffs are likely, with the total number possibly reaching 2,500.
Malloy’s $17.79 billion proposed budget also includes requirements for nonunion state employees to cover a greater share of their health care costs. The departments of education and social services will also have their funds cut by nearly $80 million each under the governor’s new plan. The Municipal Revenue Sharing Fund, a discretionary fund for city and town governments, would be slashed from $245.9 million to $144.5 million.
“Connecticut’s budget shortfall is related to sharp declines in state revenue.”
Connecticut’s budget shortfall is related to sharp declines in state revenue. As The New York Times reported, Connecticut sources more than half its revenue from personal income taxes. By comparison, most states receive a third of their revenue from personal income tax and another third from sales tax. However, jobs in Connecticut have been lower-paying on average since the recession, and many higher-paying employers have moved their operations out of the state. This has resulted in lower personal income taxes and a corresponding dip in state funds.
“We have an obligation as elected officials to tackle the full scope of our challenge,” Malloy told reporters. “We must align our spending with the revenue we actually have, not the revenue we wish we had.”
Additionally, the state is struggling to fund its existing pension program, which is operating $26 billion in the red. The initial round of layoffs is expected to save the state $27.6 million per year, according to Hartford Courant.
Tax increases unlikely
Despite the shortfall, lawmakers say they are not currently considering increasing taxes. As the Courant noted, following a significant tax hike last year, lawmakers are worried additional income taxes would alienate wealthier residents, possibly driving them to leave the state. Lawmakers further expressed their concern after two individuals with 11-figure net worths moved from Connecticut to Florida.
Speaking with reporters, Malloy said instituting a “millionaire’s tax,” as proposed by some in the state government, is an unfavorable solution.
“We’d price ourselves out of the market,” Malloy said.
However, Malloy’s proposal to address the shortfall through spending cuts alone is being met with resistance from several groups, including the state’s health care worker’s union, the largest of the state employees’ unions.
“There are other ways to close these deficit holes instead of coming back to middle-class workers,” Jennifer Schneider, a spokesperson for the union, told the Times. “If we lose 2,500 jobs in the state, that’s only going to harm our economy more.”
“Union leaders argued the layoffs could lead to dangerous staffing shortages.”
In a statement released to the Courant, Union leaders for CSEA/SEIU Local 2001 also argued the layoffs could lead to dangerous staffing shortages at institutions such as the Connecticut Juvenile Training School, a maximum-security compound for boys.
“Contrary to the governor’s claims that these layoffs are being conducted in an orderly fashion, many staff are being walked off of the job site at the same time as they receive their layoff notice in violation of their contract’s layoff provisions, leaving remaining staff shorthanded and at greater risk in what at times can be a dangerous environment,” CSEA President Stephen Anderson said in the statement.
In addition to concerns over layoffs, lawmakers on both sides of the political aisle have raised concerns that the budget fails to address long-term spending issues that are contributing to the deficit, including state borrowing and overtime expenses for state employees.
How Questica can help
When state governments are met with declining revenue and a financial deficit, the subsequent actions needed to balance the budget can be difficult and unpopular. Lawmakers must find ways to reduce state spending while minimizing the negative impact these actions may have on citizens’ quality of life. This requires carefully weighing many factors and creating accurate projections of future financial positions.
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Governments working to overcome budget deficits should contact Questica to learn how advanced budgeting software aids in complex decision-making.