Comptroller Sean Scanlon (D) joins Mike Hydeck in studio to talk about a potential workaround to the spending cap which limits the legislature’s ability to adjust the budget. Governor Ned Lamont (D) and Republican lawmakers are opposed altering the fiscal guardrails.
Mike Hydeck: Well as we head into the second year of a two-year budget, can Connecticut do more? After all, the state has a full Rainy Day Fund. We're also paying down long-term debt. Some Democrats and even some Republicans would like to see new funding for things like higher education or more tax relief, or more funding of non-profits, which often provide a lot of the state services. But spending caps are in place to make sure we live within our means. Should those caps be adjusted though? Joining me now is State Comptroller Sean Scanlon, who seems to think there may be a loophole when it comes to changing things. Mr. Scanlon, good to see you. So let's start off, our spending caps. We can only spend so much based on the revenue we take in, but you think there might be a way around that in year two of this two-year budget?
Sean Scanlon: Well just, let's level set here, because 10 years ago Connecticut was in a permanent fiscal crisis as a result of some reforms we put in place in 2017. Connecticut's finances are the best they've been in decades. We've got a full Rainy Day Fund. We've paid out $8 billion dollars of pension debt. And we've had five consecutive years of surpluses, things are going well, but there are needs out there. And I think we need to find a balance this session between paying down that debt, saving for rainy days and meeting the moment of the needs that are out there.
Mike Hydeck: So for people that, just kind of set the table a little bit, for people who aren't familiar with the spending caps, one of the spending caps is how much revenue we take in, we have to spend so much of that. And then the other one is volatility. So if the stock market does well, we can spend some of that but some of that has to go to pay down debt, right? So where would the loophole possibly be? I think I read that you said that it might be in year two, because of the way things are written.
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Sean Scanlon: So this is very complicated, obviously. But the important thing here is that what we're doing is working. Can we tweak this a little bit to make sure that we're still meeting the needs that are out there today, but not compromise the integrity of what we call the fiscal guardrails, which are paving the way for us to have this success. Right now, there is a piece of this called the revenue cap. That is what that thing you're talking about in that a second year where there may be some flexibility. But I would go a step further and say to my former colleagues in the legislature, we have a $25 billion annual budget. They're right now saying that they need about $250 to $300 million more funding to fund higher education, homelessness, all these things that I think are really well intentioned. Let's look at that $25 million we're already doing under those caps and see if there's room to cut. There are examples of that. I know they're out there. And I think we can do with existing funds without compromising the integrity of the guardrails.
Mike Hydeck: So because of the spending caps, advocates who are out there trying and want to change the spending caps, because they were based on 2017 numbers in that bipartisan agreement in the budget, should they be adjusted, at least to incorporate inflation or other economic? You know, we went through COVID, we went through the biggest inflationary period in decades. Should they be adjustable?
Sean Scanlon: Well, we've gotten Connecticut's fiscal health back on track. Now we have to make sure that everybody in Connecticut is feeling financially secure themselves, right? And I think we have to find, like I said, the balance of doing both those things. Going backwards on the guardrails, I think is a mistake. We've come a long way. Connecticut, for the first time in a long time, has that fiscal health in order, but we need to meet the needs of people today. I think we can do that without changing the guardrails, but changing the way we look at the budget. And I think there are ways to do that. And right now as Comptroller, I'm trying to find the middle ground. I think it's kind of a false choice that's out there between either strictly adhering to the guardrails or saying we got to blow the system up. I think there's a middle ground and I want to help find it.
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Mike Hydeck: If you were to pick priorities on what you'd like to try to work on first, would it be education? Would it be nonprofits? Where would it go?
Sean Scanlon: Well, listen, all of the needs are important, right? And it's an impossible job that legislators have. I used to have it as a legislator, of having to pick and choose between priorities. We want to make sure that Connecticut is going in the right direction. That means funding higher education, that means taking care of our neediest residents. That means making sure every kid in our state has access to a great education. That's expensive to do it. But I think we can find a way to do it. And I'm working with the governor and the legislature to get it done.
Mike Hydeck: And childcare and non-profits and all the above. If we pay down this debt, like we've paid, you said $8 billion so far does that overall mean? We're paying less interest over time, and there could be more money in the budget to fund these things automatically, just because we're knocking down that debt? Absolutely.
Sean Scanlon: In this particular fiscal year that we're in right now, because we've been paying down more debt than we need to, we save $650 million that otherwise would have had to go to pay down our debt. And that's $650 million, Mike, that we can use for a lot of those programs.
Mike Hydeck: Can it be used this year? Yes, they can. Okay, so that sounds like it's going to be something that's going to be debated.
Sean Scanlon: Well, it was part it was already included in the budget that they passed last year. So they've already allocated that money. But if we turn back and we go away from those guardrails, that money will not be freed up anymore. And when I came to the legislature, I was told that we had no money for anything. We were making cuts, not adding funding to programs. I don't want to go back there and I think by keeping the guardrails going, we can ensure that we will
Mike Hydeck: Both sides of the aisle say these guardrails have proved successful. There's no doubt about that. One of the interesting things moving forward, Republican leader in the House Vincent Candelora floated an idea earlier. He said let's amend the state constitution and make these even more strict, these guardrails. What are your thoughts on that?
Sean Scanlon: I think Vinny's intention is good on that, he wants to make sure that we stick with the guardrails. But last year, the legislature unanimously codified those guardrails for five more years, and tied those guardrails to our bond covenants, which in lay people's terms basically says, if we violate them, Wall Street doesn't lend us money at the same rates that they do right now. That's a really bad thing for our economy. I don't think we're going to do that. Putting them in the state constitution, in some ways, makes it harder for us to be nimble and reactive. And at best, government needs to be that. We are the land of study habits. But that's not always a good thing when it comes to government. Different needs will change. The economy will change. We thankfully avoid a recession, but we might not always be able to. And I think tying our hands to that much of an extent, is something I think would be things we would have to caution on.
Mike Hydeck: So the five years can prove predictability, which is what Wall Street likes, something predictable.
Sean Scanlon: Exactly. And I think we're already in only year two of that five-year cycle. And I think again, because it passed unanimously, and because we're sticking with it, because we have to, I don't think a constitutional amendment is necessary.
Mike Hydeck: Comptroller Scanlon, we gotta leave it there. Thanks for your time this morning on Face the Facts.
