Death of the spending cap

"Gov. M. Jodi Rell wants to shift $49.6 million in short-term purchases out of state agency budgets, proposing instead to make those purchases on credit... the governor is proposing to charge more than 60 percent of short-term purchases of office equipment, vehicles, machinery, tools and other capital items with a limited useful life... Today, nearly 12 percent of the state budget goes to pay the interest and principal due on state bonds. The state's outstanding debt equates to $6,542 for every man, woman and child in Connecticut... Shifting spending out of the general fund is one way of dealing with budget constraints... The Rell administration has repeatedly emphasized that the state spending cap is leaving little maneuvering room this budget cycle. The cap limits the annual growth in the budget based on increases in income tax collections or the inflation rate... Yet, capital equipment represents only 2 percent of the general obligation bonds that Rell proposed for 2008 and 2009. In comparison, school construction accounts for 50.1 percent of the two-year total. The governor proposed to authorize more than $1.3 billion in grants." (WRA, by Paul Hughes)

Lots of information here... I apologize for that. This article just had too many tasty tidbits for me to pass them by.

Couple of things...

First, isn't there a reason that 80% of the electorate voted in favor of the spending cap in the early 90s?

Second, CTs debt is out of control. If you multiply that $6,542 by 3million people, you get $20BILLION in debt! Then there's the teacher's $8billion underfunded pension and the postretirement benefits of other state employees... and I think we get to at least $36billion dollars in debt and other obligations. (btw, if my numbers are wrong, please correct me... but I think these numbers are fair.)

Third, we're talking about moving stuff that could be in the operating budget... into the capital budget? Don't get me wrong, I'm an accountant. I'm sure that I could defend almost any of these accounting decisions. But that doesn't mean I could defend the fact that CT is going deeper and deeper into debt... at a time when financial markets are (probably) taking a long, hard look at CT and considering whether we really should have the debt rating that we have. (And if that debt rating drops, our interest costs go up.)

Fourth (and not directly related, but if you're curious)... the town's rules for determining if something goes in the operating budget or the capital budget is simple. Items that cost more than $110,000 and have a life of more than five years are bonded. If the item is less than either one of those (such as a car that costs $20,000), then the item is paid for via the operating budget.

Fifth, one of the major problems with debt is that we're paying for stuff tomorrow. In turn, the taxes go up tomorrow. And this was one of the main reasons that I was so upset with the 109th (Republican) Congress. They were cutting taxes, but not spending. So basically they were just cutting taxes today... and forcing us to raise taxes tomorrow. Or at least that's how I saw it.

Tim White
Town Council, Budget Committee