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hi everybody i'm kyle constable i'm the connecticut mirrors manager of membership and audience development thanks so much for joining us for the third and final event in our 2021 legislative session preview series now i know you're excited to see john and keith and they're going to be on in just a moment but before we get started a few quick notes first if you missed one or both of the previous events in this series you can get caught up by visiting ctmirror.org events that's where we post all of our past event recordings so you might want to bookmark that ctmirror.org events second if you're a ct mirror member who's with us tonight let me say thank you for joining in the work of the connecticut mirror you make events like this possible you make john dankoski and keith faneuf's journalism possible you make everything we do possible and we're incredibly grateful if you're not a ct mirror member and you're with us tonight i'd ask that you'd consider joining in our work this evening with a contribution uh you can visit ctmirror.org donate to become a ctemir member last but not least i'd like to extend a special thank you to the connecticut business and industry association cbia whose sponsorship and financial support has helped to make this series possible as well so before i hand this over to john we have a brief 45 second paid sponsorship message from the folks at cbia rebuilding connecticut is a challenge unlike any we've ever faced tax hikes and unchecked government spending will hurt our recovery they won't make the state more affordable bring back jobs or attract new businesses we can rebuild our economy and get people back to work but that means taking a different approach working together to unlock opportunities and the state's tremendous potential find out which leaders stand with you and your local small businesses at rebuildct.com well good evening everyone and welcome to our final legislative preview event i'm really excited to be here with my friend keith fanath we've been talking about the state budget oh i don't know keith for years and years and years and we always have some sort of interesting story to tell i know that you've got a lot of questions for us and as we start i do want to remind you maybe you've done this before with us but if you haven't at the bottom of your zoom screen there's a little q a function and you just click that and you can add your questions what we're going to try to do throughout the course of this hour is get to as many of your questions as we can at the very end some of the questions that you don't get to or that we don't get to we'll try to add into a lightning round and of course you can always continue our conversation on twitter uh keith is at ct mirror keith and he loves to interact with people on twitter with their budget questions so before we get to any of your questions i just want to welcome keith fano thanks so much for doing this keith it's always a pleasure john i was thinking during the intro we go back longer than i can count i mean it's been a long time now that we've been discussing state finances it it really has i think we go back as as long as you were working at a in another newspaper and i i tried to get us a space in the capital press room next to you i was gonna say it's it's been a long trek it has we've learned a lot we we have and you know here's what's interesting keith is we've learned a lot but as we've talked over and over again we've almost had in some ways the same conversation you know connecticut's budget's in the dumper there's some sort of problem with the budget right now there's actually some rosy news and and i know that in about a few minutes you're going to throw some cold water on this you're going to say here's why this isn't such great news but for the first couple of minutes why don't we just talk about how things are actually in some ways doing a lot better in terms of the connecticut state budget and they have been a long time that's true i mean we're basically been we've been enjoying for the last maybe two two and a half years uh a rebound in the stock market that the previous governor daniel malloy begged and prayed for and it basically arrived just as he was walking out the door uh governor lamont sort of been the beneficiary of that but the portion of our state income tax that's tied to capital gains and dividends has been booming and as a result of largely of that we have amassed over the last two and a half years a rainy day fund of a little more than three billion dollars which is by the way the largest amount allowable by state law it's equal to about 15 percent of the general fund that's the cap the other potential good news is the new president president biden has proposed a very huge stimulus package but specifically i'm going to focus on there's a 350 billion dollar component of flexible money for states and municipal governments and the old rule of thumb in connecticut because of our wealth we generally get a smaller share than than other states we get about one percent so if you're doing the quick back of the envelope math if and i want to stress if that passes that's another three and a half billion dollars six and a half billion dollars of one-time money that's the good news okay so that's the good news and before we get off the the good news just now obviously the stock market's been performing well a couple of weird days for the stock market we won't get into that over the course of the last week but we don't know that that biden stimulus money is coming through that that big chunk that he's hoping to to get to the states will actually be there if that doesn't happen you're saying this is still a better position than governor lamont could have ever really thought he'd find himself in right now absolutely i mean we are looking at we we do our our state budgeting in two-year cycles and we are saying if we don't make any adjustments state finances are on pace to run about um 2.6 billion dollars in the red over the next two years combined about a billion three a year sorry for all the numbers it's about eight percent you might say well wait a minute where was all that money you're talking about the reason our regular budget before we get into this one-time money is still faced with problems is because and stuff john and i have been talking about for for more than a decade connecticut has a huge legacy of debt almost almost 30 percent of our budget goes to pay off that debt we're talking pension debt bonded debt and the like but let's stay for a minute on the good news and that does feel a little weird for me to say that um you have even just what we already know canadian connecticut has in the bank three billion dollars in the rainy day fund remember i said if you don't make any changes to the budget you've got about 2.6 billion dollars of potential holes in other words we have enough to keep the current state budget afloat for two years if we want to buy some time for the overall economy not just wall street to improve um and i'm glad you mentioned john you know the the stock market's had uh you know a couple shaky or odd days it does not change the fact that the dow jones industrial average is still i mean more than 10 percent higher than it was before the pandemic in other words the pandemic hit stocks plunged by the summer we'd regained all that value and then we've built upon it so i mean it's all you you know governor lamont is correct when he says don't be a day trader you can't just look at one or two days of numbers right now the stock market is the one thing connecticut's economy has going for it okay so before we get to some of the the bad news i suppose let's talk a little bit more about what this good news means for governor lamont so we're in the middle of a pandemic but yet somehow he finds himself in a position where the state is flush with cash we've got this rainy day fund we've maybe got more money coming from the federal government what does this mean for the governor and his ability to do some of the things that he wants to do some of the things that he might need to do if he wants to run for reelection and get re-elected talk about what you think this means specifically for this governor yeah that that to me is the big issue for this entire budget short-term good news meets a time-sensitive problem and that has been the issue basically since the summer since it was clear by july that the stock market had rebounded and connecticut's short-term budget problems weren't going to be that severe but but again when we eventually get to the really you know the pension debt the fact that we have 90 billion dollars in long-term debt 3 billion in the bank is a drop in the bucket against what we owe and will pay over the next 30 years the question then becomes should we be socking every penny away so that there's another smooth state election cycle or do we need to put more money into nursing homes small businesses that are about to close nonprofit social services cities and towns that are out hundreds of millions of dollars in revenue and if we say well let's get to the next election first the problem is businesses are closing people are getting sick and some people are dying i i think a lot of people in governor lamont's camp though would say that that's a awfully cynical way to look at things i mean it's not just about the election of course i mean he has said time and time again he doesn't really want to touch this rainy day fund that the state has built up because he's seen rainy days in the past he wants to make sure that we're actually shored up before we start spending once again but the argument used to be seem to make me making keith and i know an awful lot of advocates uh who say that the state has been too stingy are making is that this really was a time-sensitive problem and the fact that the state didn't want to expend more money during this time actually is costing people big time well no matter how well you take care of your car if you don't ever drive it out of the garage it doesn't really serve a purpose i know there's an old saying that says order without flexibility is no better than chaos um you you you you have a rainy day fund for a reason and the argument has been if the pandemic is not a rainy day it's if that is not a time sensitive problem uh what is the argument that has been given by the lamont administration since the spring is we could be looking at a huge fiscal mess and and if if you'll indulge me just one more example you going back to the numbers sure back in in late april and early may uh governor lamont and i would argue through no fault of his administration thought the problem we're staring at now this 26.6 billion dollars was going to be probably double that size and he also thought by now the rainy day fund would be zero sometime between may and now a whole heck of a lot changed zero turned into three billion dollars in the bank five to six billion dollars of potential holes became closer to two and a half but my point is we didn't just discover that yesterday things started to become clear in the fall by september and then again in october and the legislature were in for special sessions and nobody wanted to talk about the improving revenues and connecticut has been slowly but surely acknowledging that and at the same time we're getting this good news in the stock market we're seeing that we still have 190 000 people collecting weekly unemployment benefits to give you some perspective we lost 120 000 jobs in what we call the great recession of 2007 through 2009 we know that the entire hospitality industry is still fragile we know that cities and towns are out again hundreds of millions of dollars many of them there was a new report out that she'll basically borrow to try to stave off property tax increases so in other words there are a lot of segments of our economy and the comptroller kevin lumbo has really been pointing to this calling it a k shaped recovery while one part is so we can do this right away going up another part's going down those are all the letters i'm going to spell out that's a real issue and that time-sensitive problem has kind of been put on ice we haven't been really dealing with it as a state or many would argue that what what would the state do to deal with those issues i mean how might the state actually spend down some of its good fortune at the moment to make a big impact for people as they're hurting now there are as many ideas out there hopefully as we have people listening today but just to give you some of the ones that people have been really pushing for you're going to see a proposal tomorrow from the leaders of the appropriations committee to seriously beef up funding for the uh private nonprofit the community-based agencies that provide the overwhelming bulk of the social services in this state we already have a proposal from the top uh democrat in the state senate martin looney to increase two grant municipal grant programs that reimburse communities for property they can't tax state land colleges and hospitals this is really a problem in the cities this is what led hart pushed hartford to the brink of bankruptcy the legislature is in a position to do that now i think there were people who wanted to do things like that months ago and just very quickly the nursing home industry asked over the summer for an extra 300 million dollars a year um it's not easy to take that out of state money but it's also there is a way legally where we could have done it i mean the hospital industry still has not recouped close to what it's lost we have a lot of we have more problems than we have dollars but we still have a lot of dollars that we could have put towards some of those some of those dollars toward those problems so we'll come back to some of that in in just a moment i i want to just dig in a little bit more to our continuing tale our you know decade long tale of bad news you talk about the long-term obligations and you you skim the surface a little bit about it some people who follow the state budget very very closely know some of these numbers and know the the deal but this is something that the reason we talk about all the time is because it's really important to understand just how underwater the state has been for such a long time maybe you can put into some context exactly what it means to have that much of this the state's uh budget going toward debt service what it means to have 92 billion dollars in long-term obligations just so people can get a little better sense of what we're dealing with here right i think my favorite analogy on this that i try to use is crabgrass in the backyard if you think of the state budget as just a rectangular fenced-in backyard and the backyard is filled with everything you like maybe you've got too much stuff crammed in it you've got a picnic table you've got a kids wading pool and maybe you've got a trampoline you've got a gym set you've got all these things and and i'm trying to make them represent things we care about like transportation and healthcare but there's also some crab grass in the backyard and just go with me on this wherever this crab grass you can't have anything else and as the crab grass spreads which by the way is our debt payments you start throwing things over the fence it's like all of a sudden we can't keep the trampoline in here anymore because there's no room for it this in many states can represent 20 of the budget even less in connecticut it was pushing more than 33 and we've already refinanced some of it and pushed it on to future generations at great cost but what it is doing is it's leaching resources away it's the magnet next to our budget compass it is the reason why when people say why do we even have to talk about tolls without with our gas taxes don't we have enough money well for a decade to help cover our pension costs we spent hundreds of millions of dollars every year in gas tax money not in the transportation system we've leached money out of the municipal aid program which is why property taxes have gone high where did that money go instead into the pension debt we've been taking money out of just about every priority you care about to to try to clip down this crab grass that is a problem and we have overall when you look at our pension debt our bonded debt our retirement health care debt things that we're legally committed to and and i don't care what anyone else is telling you we have no choice but to pay we're talking about 92 billion dollars the state owes again we have 3 billion in the rainy day fund it's great for the short term but the bill that we have coming due over the next i shouldn't even say 30 years closer to 20 is monumental so i think one question a lot of people have is you know politics is a short-term game the governor serves for four years the legislators serve for two right they're constantly looking to get reelected it's very very hard to make decisions that are anything other than short-term but you're talking about a very very long-term problem just to continue with your crabgrass analogy key the the problem with 92 billion dollars worth of crab grass is that that's a hole that i can't think of a way sure to get out of it's like the crab brass takes over and it grows over your whole house and you just have to move and we're not going to do that i mean what do we do about that problem because we can continue to talk about it being this thing that's looming over every decision decision that's made of the capital but in i don't know that we can do anything about that substantively can we yes what we can't do is anything that's fun about it what we have to do is reset our expectations because now that now i'm going to try to give you a little something to offset it and i'm not saying this is the only solution i'm saying the math is saying over the next 20 to 30 years there is no way unless you think a federal judge is going to tell one of the wealthiest states in the nation you don't have to pay your bill and by the way for the people who say no the rich are moving we can't pay it we can pay it it's not the death of connecticut it may be the death of connecticut as you know it but it's not the death of connecticut we can pay that bill and we're not even going to end up being pick you know your poorest state we're not going to be arkansas we're not going to be michigan but we we are still going to be able to pay that off why you might say that well let me point something out they say since the last recession the top 1 in the united states makes 24 times with the bottom 99 average and there are a lot of very wealthy people on the bottom 99 percent in connecticut that ratio is 43 to 1. in fairfield county the ratio is almost 75 to 1. to give you an idea of also what that translates into into budget choices westport and bridgeport two communities very close to each other if you look at their grand list proportional to their population in other words how much wealth can they tax for every man woman and child in those respective municipalities westport's grand list is 10 times the size of bridgeports per person for every man woman and child westport can access 10 times the wealth even though if you talk about the type of problems they have to deal with crime a welfare caseload traffic potholes whatever you like there are a lot fewer problems in challenges in westport than in bridgeport there is wealth in connecticut the challenge is if we're saying no that's a non-starter that can't be touched then what you will continue to see is the crab grass explode and and the short-term goals that that's the nature of politics will continue to do as much as they can to put off the day of reckoning and by the way it's still getting closer because the last point i'll make john is you hear kicking the can down the road we're not kicking the can can doesn't get any bigger when you kick it we're rolling a snowball it gets larger and larger every time we slide it down the road or we refinance our pensions we pass on billions of dollars of long-term debt to the folks who are in kindergarten right now in connecticut okay so you we've gotten to the point in our conversation where then we'll talk about taxes taxing that richest 1 or 0.1 percent here in connecticut that's something that as we've talked to the governor over the course of his entire tenure and certainly recently he has has said i don't want to do uh he told me on the podcast that he actually would like the biden administration to do that at the federal level and it looks as though the byte administration is going to attempt to do something just like that what's funny keith is i actually was watching an interview on cnbc in which uh elizabeth warren was talking to one of their hosts about whether or not people would get up and leave the country if there is a marginal extra tax placed on the wealthiest one percent we're concerned about people leaving the state so first question are people leaving the state or going to leave the state because the state is going to raise taxes on the wealthiest individuals uh the the data that we have the u.s census data consistently shows that is not a factor and i'll just give you two examples um there is one state in the nation that has increased its income every year by migration i'm not going to say it's increased its overall income there are a lot of factors did they grow jobs did people get raises but if you say okay this state i'm thinking of how many people moved in and what did what were they making how many people moved out what were they making can you guess the state that's gained income via migration every year for the last 30 years you know since you asked this way i'll say connecticut no it's that it's that paragon of wealth arkansas oh of course which ranks basically competes with mississippi for dead last and just about every poverty metric you can think about for the simple reasons that you can expect when you're on the bottom there's nowhere to go but up every year the odds would suggest the people moving out of arkansas are poorer than the people who move into it the converse is true with connecticut maryland new york new jersey and just about every state that ranks near the top and per capita income and for that matter per capita wealth every year the incomes of the people who move out of connecticut are generally higher than the incomes of the people who move into connecticut from other states but this rate of exodus that you would call it is basically the same and has been for the last 40 years like stamping out license plates and if you want a really good example this is the last point i'll make on this in 1991 when we passed the state income tax just before we adopted it we already had an income tax on the books for 20 years but it was only aimed at the wealthy we taxed capital gains if you made enough of them at seven percent we taxed dividends in interest as high as 13 percent when the income tax was passed all income initially was taxed at a flat rate of four and a half percent meaning for fairfield county it was a massive tax cut massive for the next five years income migrated out of connecticut at the exact same pace it had for the five years prior to that by that logic people should have been pouring into connecticut [Music] nothing changed that has still basically been the story right up until now you talked to the governor just this week despite pressure coming from people on the democratic side of the aisle he doesn't have any interest in entertaining tax hikes on the richest connecticut residents no and i i do think we should clarify a lot of these proposals for tax hikes on the rich r from his own party are basically founded in a principle of revenue neutrality meaning okay yes because we have some projected deficits people are saying i want to raise taxes on the rich to pay for a tax cut on the middle class to pay for more tax relief on the port or to pay for more property tax relief for municipalities um so and i look i fall into the same trap i say it i asked the governor you know was your position on raising taxes on the wealthy but a lot of these proposals are really about a form of wealth redistribution and governor lamont is saying well i don't want to raise taxes on anyone therefore because that is really the only way right now you could do it i mean nobody's looking i think to raise taxes to launch new programs in connecticut but also nobody's looking programs but nobody's looking to raise taxes either to solve the long-term problem that you're talking about either that debate is not happening this year that's correct so it's just short term what can we do to help people who are struggling in covet to put more dollars into certain homes that's been the debate for this year so when you wrote this week about uh senate president martin looney coming out with a plan to uh tax homes of richer people in the state if you can explain a little bit about what is in his plan and where those dollars would go again as you say this is not money that's going to serve or solve our long-term problems right uh what senator louis proposed he was trying to have a progressive element and stay away from the income tax because it's such a political lightning rod and he does have another proposal which does involve income but the the one you're talking about john is he would create a new statewide mill rate of one percent however the first three hundred thousand dollars of assessed value on your house would be exempt now keep in mind the assessed value of your house is equal to seventy percent of its market value so if you're saying well what house is going to get hit your house would have to be you'd have to be able to sell it for more than 430 000 before you owe anything and the thinking is being that if if you know governor lamont says well if we raise taxes on the rich they'll flee the state senator looney's saying well unless they're going to find some way to deconstruct their house and haul it away with them they're going to have to sell their house to someone else is going to come into connecticut so if we tax the house we keep the wealth in connecticut and the goal would be to turn around take that money and funnel it back into communities with the high poverty levels does that have a chance of passing i think governor lamont i i don't think first of all the the republican minority in the house or the senate would support it i don't think governor lewis he's pretty much drawn a line in the sand i think his own party is trying to force a debate um because governor lamont has certainly been very cautious he has not said anything about running for reelection he has not made any announcements um but i think it's fair to say that a lot of democrats in the general assembly expect that he's running expect him to run again um remember that he actually campaigned for the office in 2018 with a platform that had a huge progressive taxation proposal of i shouldn't say huge a very significant progressive taxation proposal that he ultimately scrapped and they're hoping that they can put some pressure on him yeah you and i have talked about this part of what he ran on was providing tax relief and tax cuts to poor and middle-class uh individuals it it would have been a pretty big tax cut it's something that he did not deliver on and this is an another thing that you've suggested perhaps he he could have done given the money that the state has come into because of money coming in from wall street right well when when he was running in 2018 in fairness he was running into a campaign message that was again not trying to take sides just looking at the math uh was empirically dubious at best and the the republican candidate uh bob stefanowski had proposed phasing out the state income tax i'm not talking about what's fair what's right i'm saying what's you know what does two plus two add up to the income tax raises half the money for the state budget if you took the income tax away the sales tax which is our next biggest revenue engine would basically cover the payments on the pension and the bonded debt you get to run you haven't even given cities and towns any money and you've got to run the rest of government and you have to run a medicaid program and you have nothing else left in other words it just couldn't be done and my campaign was understandably frustrated i think with the news media that people were not pointing out that this person was promising something that the math didn't come close to adding up so they said well we're going to come out with a realistic tax relief plan and it was an income tax cut for the poor and the middle class by expanding a particular credit within the state income tax the property tax credit trying to analyze that i still ask the lamont campaign how are you going to pay for this because there were some challenges that whoever was going to be governor in 2019 and 2020 faced even without knowing the pandemic was going to happen the point that i'm getting at is the lamont administration said we're convinced we're going to pay for it we we have a way to pay for it and they show it how they were going to do it in his first year and a half in office the fiscal conditions did not get any worse in fact they got marginally better than the projections held when he made his promise he instead found that it was harder to balance the budget than he thought in fact it was a proposal to tax the rich that the legislature had put forward to to tax the capital gains earnings of households that made more than five hundred thousand dollars a year the lamont administration insisted on killing that well then there was no way to balance the legislature's budget unless his tax relief also went on hold so everything went into limbo since then governor lamont has just said i don't believe we should be doing tax redistribution at the state level he sincerely believes it will produce wealth exodus out of the state he says if it should be done it should be done at the federal level the challenge for that is as we talked about connecticut generally gets the smallest share of federal money because of our great wealth so some progressives in the legislature have essentially proposed tax relief that is on par with what lamont had promised and i'm wondering what traction you think that that's going to get keith without the governor's support i think it's going to get a robust debate i really do i'm not sure beyond that because um and you know you've already mentioned uh senator looney's proposal on the statewide property tax he also brought back that capital gains tax i talked about uh representative sean scanlon from guilford has proposed a new income tax credit based on the federal child tax credit this would give probably about close to about 450 million dollars a year by the time it's fully implemented to poor and middle-class families um sean did not say oh i'm committed only to taxing the rich but he said i'm not going to cut programs that people rely upon and i'm not going to raise taxes in the poor and middle class to pay for their own tax relief so it doesn't leave a lot of other options for for where to go that's also gotten the attention of the state employee unions who very much remember that back in may when the administration thought the pandemic was going to cause much more economic chaos for the state budget because they didn't know wall street was going to rebound they asked the unions for concessions a lot of people forgotten the union said no we've already given three times in the last decade we're not giving any we're not giving again i think they're going to put a lot of pressure on him i still think ultimately he's going to draw the line but if i can just ramble on for one more minute i think that's what's going to make i think this year is going to set up one of the most contentious budget debates next year that we've seen in a long time i think governor lamont will try to dig in and say no i don't want to do any tax redistribution and no we can't use this rainy day fund for any new programs because he'll correctly point out it's one time money but it's been a long time john i i trying to think back in my career the last time somebody ran for governor and did not propose some form of tax relief rebate some other form of tax cut in their re-election year if governor lamont comes out next february and tries to pay for an election year tax cut using one-time money after telling his own party you can't have new progra s using one-time money i think it's going to get ugly a lot of questions are coming in and i'm going to start to get to those in just a second maybe though we can just quickly talk about the status of some of the the programs the services that the state provides in this year of covid if it was a relatively good year for the stock market it was a incredibly poor year for an awful lot of people's employment as you said many people still out of work many people still collecting unemployment hundreds and hundreds of businesses closed but then there's any number of other social services that have been stretched to the limits including hospitals paint a picture if you would perhaps of of just how dire it is for some of the services that the state usually provides at this point given the pandemic okay well you started with social services so let's go there most of most the overwhelming bulk of the state social services are provided by small community-based non-profit agencies that connecticut contracts with these are not their staff are not state employees these are agencies that long before the pandemic were facing annual turnaround rates you know attrition rates of 25 26 turnover rate was sorry was the word i was groping for um they're hemorrhaging millions or tens of millions of dollars a lot of them people who work with the disabled who work with people struggling with drug addiction there will be day programs now we we tried to keep like the methadone clinics and the light going but a lot of the day programs especially for people with intellectual um and developmental disabilities those had to those had to stall or be or be pulled back during the worst of the pandemic that cost these non-profits far more than they say by not most of them have had layoffs have had to reduce their staffs and they're expecting by the way to get a ton more business but i don't mean in the good sense i mean like they're going to be asked to do more with the same amount of money because we're anticipating a huge surge in state retirees i should have also mentioned these non-profits are basically getting paid only about two percent more than they were making a decade ago so after you factor for inflation they're way behind the eight ball that's that's one example how about small businesses we had a republican proposal for a small business bridge loan early in the pandemic governor lamont did seize upon that he offered 25 million they doubled it almost as soon as they opened it when they realized they badly underestimated the need they closed the entire program within 48 hours of opening it and it maxed out they had over 200 million dollars in requests for 50 million dollars in funding within 48 hours so they just shut it down that was the last state funded program so i mean and you still have a restaurant industry that's baking from now they've gotten federal money and the lamont administration will say we've passed all that along but there are many who are going to say that's not enough the nursing home industry warned that they they needed another 300 million dollars this fiscal year to stay afloat to stay you know to balance their books to not lose money um i i believe the hospital industry uh i i think their their losses even after you back out what the state has given them easily exceed 500 million we're approaching a billion dollars those are just some of the places where people are hurting and our colleague jacqueline ray thomas and i have talked about the fact that although the state has put forward tens of millions of dollars in rental assistance to help people who couldn't pay their rent it's about a tenth of what people actually needed to pay their rent and of course the landlords are stuck too because they don't have people unable to pay rent and they're still paying their mortgages now you're right i left out i'm sorry i left out rental assistance and for that matter i should have also mentioned higher education's getting clobbered um there's a huge question mark hanging particularly over the state university system and the community college system what if the covet uh pandemic results in a permanent shift in students attitudes you might say come on they're young they're all going to go back to campus what if only three or five percent of the students who were living on campus decide you know i like saving the money by going remote the more i think about it i'm going to finish my education at home taking classes online this is a system that since the mid 90s to deal with that pension problem the state has been giving them less and less money we've been borrowing more and building new dorms and saying here's how you run your colleges go on and get more students to live on campus as it was that system is not balancing the books which is why tuition keeps going up and up and up what if the number of kids on campus goes down even marginally now all of a sudden a system that's in big trouble is going to also be eroding cash hemorrhaging cash all right i've got a lot of questions to get through and we'll try to go through as many of these quickly as possible um let's see bill asks what's the state going to do about the crumbling infrastructure he talks about the gold star bridge etc any solutions being proposed uh do they have any chance of passing so this was the big conversation last year governor lamont didn't want to have a conversation that was all the time about tolls but as we said earlier the transportation system is crumbling bill has a question about that what's happening with that right now keith very little unfortunately but thanks for the question bill tolls i mean nothing is ever certain but tolls are very very unlikely to be brought up this year you may see some proposals for gasoline taxes but because we have this one-time money what you could also see is the administration could move some money from the general fund to the special transportation fund the other thing unfortunately that we're doing is we are effectively slowing down the money the red that we're putting into the capital program most of the the money to build roads and bridges and fix rail lines we borrow that and in turn we also get matching grants from the federal government well if we go to wall street every you know 10 months seven months to borrow money and then we start stretching out the time in between we borrow the same amount of money we're slowly starving that program and there are already signs that we're doing that to save money uh somebody else was asking just along those lines i don't know if you gave us a number i mean where are we with with deficits on the special transportation fund i mean do we understand exactly what the what the hole is what we did with the special transportation fund just to remind everyone in 2015 governor malloy got the legislature to pass this ramp up program we were going to take a portion of our sales tax receipts out of the general fund put it in the transportation fund and we were going to go borrow a lot more money every year and we did they called it we're going to ramp up the way that borrowing shows up in the state budget is we make payments on the principal and interest every year and it was sort of a way to give us a little shove into tolls in other words we borrowed more money than we could pay off but the thinking was once we've incurred the debt we'll have no choice but to pass tolls the five-year ramp-up period ended last summer we owe the bill we don't have enough money to pay for it we never passed tolls or for that matter any other thing so at this pace the special transportation fund runs out of money in 2024 and that is assuming we slow down the amount of money we put into infrastructure repair by about a third asks we used to hear a good deal about the teachers pension fund not being funded where is that now and where does it look like it's going teachers pension fund is still a huge problem two years ago when governor lamont came into office they said we were going to refinance it what we did was we took um some uh some some type of a holiday i guess i would say we took a break we actually decided that we would pay into the pension fund about 200 million less in governor lamont's first two years than we paid in total than we paid under governor malloy that money will be made up by kindergartners now plus a heck of a lot of interest um and i think that will not be the last time you see the pension fund refinanced by governors um it's become the new way to to roll the snowball down the hill but it's still there it's still massively unfunded lee has a question uh does lamont have any plans to attract businesses back to connecticut i think you will see the governor roll something out again the challenge is going to be the best way to get some businesses back would be to offer some type of incentives he can do some of that with borrowing but if he wants to do it with taxes basically anything you give out in tax relief you've got to get back with higher taxes from someone else so you've got to figure out who to tax because he's drawn a line in the sand on that i think he's going to have a tough time doing any major tax incentives for businesses they may nibble around the edges but nothing's substantial yeah and i think two things i wanted to to talk to you about on that you know the last governor spent quite a bit of time and in money giving out tax incentives to get businesses to come here uh right now in the midst of this pandemic when so many businesses that were built here in connecticut have closed i guess i just wonder if if tax incentives for businesses even if they were politically palatable at the moment would be even a starter keith is that even a way to get businesses to come here to connecticut given that it's really hard to start a business of any kind right now or maybe for the next year or two well fred karstenson would never forgive either of us if i did not mention that he says there is a way to do it if you structure it i want to point out governor malloy did do some tax incentives but most of the relief he did was on the state's credit card we borrowed most of the money that we gave out to help businesses governor lamont could do that as well but he's talked about a debt diet um fred carstensen who's the heads the economic think tank at uconn has been saying the state's big problem for a long time has been its complete lack of data its inability to take advantage of a lot of these stranded credits businesses in connecticut have a lot of credits on the books that in theory they're never going to get to tap because you can only use so much of them at one time he's saying if we tie these to job growth pledges that we could actually sort of use them as as bait to get these industries to upload and if we run the numbers and we invest in the right areas it will pay for itself but it would involve government thinking out the outside of the box and and generally government's never that creative uh chris asks how much could the expected silver tsunami of state employee retirements save annually uh any other cost reduction ideas to close the product projected deficits and fund long-term liabilities in lieu of raising taxes on the wealthy or anyone um thanks for the question that's a good one just to give people some idea there are projections that as much as 25 of the workforce could be eligible to retire between 2022 and 2023 they're talking about 12 000 people i don't want to say i think you'll see 12 000 people retire nor do i think even if they did you would see 12 000 positions left vacant um i want to keep have people keep in mind that the executive branch workforce went down as it is about 10 under governor malloy it is a lot tighter than people realize there are a lot of agencies um that have staffing problems um also john we talked about this during the moe administration you don't save anywhere near as much money as you think when people retire when they retire they're no longer paying into the pension fund they're drawing benefits so the first thing that happens is your pension contributions go up in the very first year that people leave office when you're paying out depending on how veteran they are accrued sick time and vacation time and other things many times there's very little savings um you're talking about and i still think that the legislature is going to have a tough time not refilling these positions many of the unions have language in their contracts that say you can get rid of our jobs if you're eliminating a program if you're eliminating a service but if you're going to privatize it you can't do it so a lot of these jobs are going to be refilled i think the savings you'd be lucky in the first year if you even saved 150 million dollars in a 20 billion dollar budget we're talking a fraction of one percent quickly before we have to take a break sorry are are there savings in state government that you can see right now when people say well state government just needs to run leaner we need to figure out a way to save money and deliver the services more efficiently do you see ways to do that there are not a lot of savings in the short term because so much of our money goes into what are called fixed costs when you're putting 30 percent of your budget into debt payments and then when you're putting say another 10 of your budget 15 of your budget into municipal aid which nobody wants to cut and then you figure out medicaid and by the way we haven't even talked about payroll yet all that's really left are social service programs and that's not that big a portion of the budget good luck cutting that during the pandemic i'm talking with keith fanath he's our budget guru the obi-wan kenobi of the state budget and he's going to be back to answer a lot more of your questions in the last portion of our program but we're just going to take a quick break here and hear another message from our sponsors uh cbia rebuilding connecticut following the coveted pandemic is a challenge unlike any we've ever faced before state tax hikes and unchecked government spending have proven to impede our recovery they don't make our state more affordable the chase away our businesses good paying jobs and our people the good news is we can rebuild our economy and get our people back to work but it's going to take a different approach and different thinking our businesses were essential when our communities needed them most and now it's our turn every business worker friend neighbor is essential to recovering our economy better stronger and more prosperous than before ask your local leaders to stand with you and your local businesses sign the rebuild connecticut pledge at rebuildct.com [Music] and thanks again to cba for supporting this entire series thanks to you if you're a member of the connecticut mirror for your support as well all right keith you got just a couple minutes to go before 8 o'clock let's go through a lightning round of a lot more questions people have martha asks is marijuana legalization likely to move and isn't that a source of revenue there's a very good chance that it moves again we're talking about tens of millions of dollars and i know we've talked about a lot of numbers but keep in mind in a 20 billion dollar budget one percent is 200 million deficit that we're looking at is about 1.3 billion a year again marijuana maybe in the first year 60 million 50 million uh you would take it but it's not huge uh jim asks a question that has come up a number of different times in various forms so i'll ask his version of it says if taxes don't matter as you say in decisions where businesses and residents choose to domicile why have we lost billions of dollars in tax dollars to texas and florida we lose residents to these states every year and most of it is high net worth individuals leaving yes we lose people to texas and florida every single year we've lost them when we've prospered we've lost them when we've declined we've lost them at the same rate connecticut doesn't import its millionaires it grows them and taxes always matter i'm not saying they're a good thing to have i'm saying the math says welcome to the land of you're not going to have a choice because of your legal obligations the only way to pay them uh charles a ks if we modernize systems in the state won't we save money that's something we've talked about over the years i mean some of the state systems are not as we know very modern some of them have been modernized in the last five or ten years sure and we absolutely will and i'm not saying that's a bad thing to do it's literally just what's going to change the scope of the problem that's like saying you know you've got to get rid of a tree stump in the backyard and i hand you a pen knife and say go out and get at it and you scrape at the tree stump for two hours you haven't made the problem worse you have made it marginally better it's worth doing maybe but it'll improve services much more than it will save money is there consideration eleanor asks of having people continue to work at home in an effort to save money and consolidate work in state buildings now this is interesting keith when you talked about uh say uconn if kids don't ever want to go back to school in the same way they did well that's going to be a problem for a yukon but if the state said you know maybe we can change the way we work post covid i don't know is that a way to save some money sell off some state buildings i don't know i do think you're going to see that simply because people don't want their staff getting sick in large numbers at one time and i think people have also been pleasantly surprised at how much productivity has either maintained or grown during the pandemic again small numbers there are only a few tools that can deal with the scope of the problem we have it's not that these are bad ideas but it's like you've got four feet of water in your basement and somebody says i have a really good dixie cup and i want to help you deal with the problem it's good that you want to help but you're not bringing the right tool to this problem so so john asks something that a few people have asked some version of so keith what would be your top three fiscal and budget priorities for the state and in your view what are the best solutions for each of these i mean obviously you're not running for governor or anything i mean what would you do to help solve some of these problems i always say john i am running for governor it's at not a chance in hell.com.gov and dot org um no i i mean i as obviously as a journalist i can't i can't tell you necessarily what the state should do i will tell you what the math would suggest though our pension debt whenever we don't restructure it and kick it down the road and grow it unfortunately has been growing many years faster than our economy grows so what do you do when your problems are growing faster than your economy ultimately the only way you can do it is you're forced to choose between all bad choices all these things will weaken your economy putting off the debt until it gets so big that wall street won't even let you borrow money cheaply is not the solution either at some point you have to look at the big revenue engines and say we have to start paying down this debt and i will point out we have more than three and a quarter times the per capita pension debt of the average state most other states don't have the problem anywhere close that the connecticut has new jersey commissioned to study last year basically what can we learn not to behave like connecticut and that's new jersey i'll point out but a lot of sorry listeners from new jersey yeah exactly i'm sure we've got a lot of them but as you say that keith an awful lot of people would say look if you turn on those big revenue engines in order to solve the problem that is going to the state's economy i mean it's just not going to it's not going to be competitive and it's not just about rich people leaving it's about in many people's minds truly crippling the job creation in the state is that a concern you're talking about a long slow haul but i would i would present to you that we're going through a long slow decline right now we're still basically it's like one more analogy it's like going to the dentist after not brushing for 30 years and say i will only listen to pain-free solutions because i need something there's no such thing as a fun root canal it's an oxymoron there's there's a headline for you allen asks will minimum wage continue to go up or will they hit pause on that i think that will continue to go up with the democrats and the majority i don't see any way heading into another election cycle they would hit pause on that nathaniel wonders can't we restructure our pension obligations like rhode island did no and that's a i'm glad that's a great question there was a there was a great new york times article but i think most people read the headline this was several years ago and about what governor raimondo did and they didn't read the article rhode island promised almost all of their benefits only statutorily so they had a lot more leverage in court connecticut promises its state employees their pension and their retirement health care via contract teachers we've got bond covenants we've promised our investors that we will make our payments [Music] i have yet to find anyone who can even show me legal research that says that we can get out of these payments uh howard asks what percentage of annual connecticut tax revenues come from the dalian cohen families what percentage of annual revenues come from fairfield county i don't know if you know all those numbers off the top of your head but the the larger point is how much do we rely on fairfield county and some some people with names like that to pay an awful lot of our bills i and i couldn't speak to the tax obligations of a particular family but but absolutely in terms of a roughly 10 billion dollar income tax stream the majority of that money without a doubt comes from fairfield county keep in mind too um the think of it also this way instead of just dividing it geographically about two-thirds of the income tax comes from paycheck withholding and about one-third from quarterly filings which are like you know capital gains dividends but there are other sources of income that are filed quarterly but those are the biggest ones if you're in the the lower brackets you might get less than 10 percent of your income from investment earnings when you get to our top income brackets they're between 75 and 80 percent of their money comes from these sources which will show you why a proposal for a capital gains tax is so controversial uh fred asks is there a way to increase funding level of the pilot program that's payment in lieu of taxes folks the the state has come to nowhere near meeting its obligations it seems a higher level of pilot payments he writes would go a long way toward helping communities and taxpayers that are under stress yeah that's a really good question that is by the way where senator looney wants to re-channel money he wants to put it into the pilot program hartford officials said that was one of the biggest problems that pushed that city not into bankruptcy but into the threat of bankruptcy it will also come down to whether or not governor lamont wants to be flexible with the state spending cap you might need to legally exceed the cap to put more money into pilot because the pension money um is beginning soon to come under the cap and it's going to start squeezing space even tighter a last question for you comes from willis and it goes back to the beginning of our conversation and we've talked about this in some way keith but i'll i'll read what he he writes uh thank you uh mr fanoff and he'll refer to your november 9th article connecticut's extreme inequality poses major obstacle to sustainable inclusive growth this is part of a big inclusive growth series that we did uh on the connecticut mirror and he'd like to share your concerns from the article if there's anything in this year's legislative budget to address any of the systemic inequities in connecticut because i think keith a lot of what happens when we talk about the budget is we talk about well money coming in money going out are we going to tax the rich to pay for long-term obligations or things that uh you know senators and representatives want to do this year the thing that we were trying to address in that article is just the enormous inequities that we have here in the state that are as systemic as the problems presented by a 92 billion dollar long-term debt obligation so maybe you could address that a little bit is there anything that's being talked about right now at the capitol to really get into those big problems okay i feel bad because i'm going to end on a down note but john what else have i done um the the short answer is so far right now there's not a lot and i think the best way i can defend that prediction is to ask you just to recall back to the summer it was a special legislative session it was largely in response to the tragic death of george floyd um the the legislative leaders came out and and particularly in the senate and they proposed a very aggressive agenda um and they felt with the support from the black lives matter movement like they were really going to make progress and ultimately it was all watered down to i almost feel bad saying only a police accountability measure but here's my point the fiscal note on that was 1.5 million dollars now if you and i had that we'd say 1.5 million dollars that sounds great i was doing a little furious calculating here well john was talking 1.5 million dollars is one 133rd of 1 of the state budget in other words we were happy to say these things matter to us provided they don't cost us money if you want to make improvements in these areas you're talking about money right now all the money's going into the pensions and i don't think anyone's gonna let us stop doing that so if you don't identify more money you have to put aside those goals and i'm sorry to give you that blunt of an answer well so maybe we want to end on such a down note uh keith the governor's budget address has been pushed back from its normal perch a week i believe right it's it's on the 10th of february coming up um do you expect anything unusual different will there be any surprises from ned lamont and his administration in in this year's budget there will always i think there will always be some surprises but we are still largely constrained by our pension debt it's been a long time since we've gotten something where it was it was a what the average taxpayer would call a good surprise um i don't think you're going to see anything too big in terms you'll see some more money for higher education i think that's certain i think you'll see some efforts to help out the cities and towns will keep trying to modestly improve education funding i think that's about the best you can hope for keith faneuf covers the state budget for the connecticut mir he is although i have the beard for it he is the gandalf of the connecticut state budget uh if you want to continue this conversation with him on twitter he's at ct mirror keith he loves to mix it up on twitter if you have any uh questions for him that we did not get to tonight keith thanks so much and uh happy budget year happy budget year john let's keep doing this let's keep doing this and thank you to everyone who joined us tonight as i said you can continue this conversation at ctmirror.org go to slash events look for more events that we've got coming up i also encourage you to go to ctmirror.org donate the work that keith does jacqueline ray thomas and kellen lyons dave altamari mark pasano because all the great reporters that we have at the connecticut mirror that work is done because of people like you who give very generously to the mirror five ten twenty fifty a hundred a thousand dollars when you give to support non-profit journalism of this quality it goes a long way to keeping this state informed and that's something that i think we all can get behind so please do support the connecticut mirror today go to ct.bear.org i want to thank you for joining us and thanks for joining us for all of these specials if you go to our events page you can look at the other ones as well and get ready for this upcoming legislative session thanks so much please have a good night