Hartford Business Journal

HARTFORDBUSINESS.COM | NOVEMBER 25, 2024 29 Opinion & Commentary Editor's Take Lawmakers must protect fiscal guardrails C onnecticut received some posi- tive economic news earlier this month when analysts projected a rosier outlook for state budget reve- nues in the next few years. In their November consensus revenue forecast, the Office of Policy and Management and Office of Fiscal Analysis said they estimate the state will collect an additional $1.3 billion in tax reve- nues over the next two fiscal years compared to projections that were made in April. That should be music to the ears of legislators, who will return to the state Capitol on Jan. 8 for the 2025 legislative session, during which they will debate and even- tually vote on a new two-year budget for fiscal years 2026 and 2027. However, lawmakers won't be able to use all that extra money, thanks to fiscal guardrails that were enacted in 2017 that place annual restrictions on how much tax revenues lawmakers can spend. Those guardrails, which include several types of restrictions, in recent years have helped the state regain budget stability, replenish its rainy day fund and pay down long-term pension liabilities. That's been a positive turnaround for a state that, in the wake of the 2008 financial crisis, faced a barrage of annual budget deficits that led to two major tax hikes and constant spending cuts — all of which contributed to a decade of little to no economic growth. Nevertheless, those guardrails could be under threat, as some Democratic lawmakers, who control both the House and Senate by large majorities, have expressed a desire to loosen them in order to spend more money on govern- ment programs or constituencies. That would be short-sighted. Lawmakers must protect the fiscal guardrails to ensure we don't return to an era of fiscal instability, which had a detrimental impact on the economy and businesses' willingness to invest in the state. While Connecticut has enjoyed a positive economic recovery coming out of the pandemic, the state's growth rate still lags the nation's. According to a recent report from the progressive Connecticut Voices for Children, Connecticut's nominal GDP growth rate from the pandem- ic-induced recession through 2023 was 7.6 percentage points lower than the U.S.' growth rate. That translates to an estimated $22 billion in total missed economic growth since 2019, if the state's economic growth had kept pace with the U.S.', according to Connecticut Voices. We can't afford self-imposed economic setbacks. Easing the fiscal guardrails will send a negative signal to the business community, particularly since the state's $23.4 billion annual budget relies heavily on volatile revenue streams — including income and business taxes — that are tied closely to the economy's performance. During economic slowdowns, those tax revenues shrink, leaving budget gaps that must be addressed through spending cuts or tax increases. One of the guardrails, known as the volatility cap, requires lawmakers to save a portion of quarterly income and business tax receipts to prevent over- spending and cushion the state from future downturns. In the current fiscal year, which began July 1, it's estimated the cap will force lawmakers to save $1.4 billion. In fiscal years 2026 and 2027, that savings is expected to total $2.5 billion, according to budget analysts. It's hard to deny the positive impact of the guardrails. According to the CT Mirror, since the guardrails have been in place, the state has ended every fiscal year with a surplus, achieved several upgrades from Wall Street credit rating agencies, boosted its rainy day fund to a record $4.1 billion, and dedicated $8.5 billion in surpluses to pay down unfunded pension obligations. It's understandable some Demo- crats and other special interest groups — including public universities, hospitals, nonprofits, etc. — want to loosen the state's purse strings to fund initiatives that arguably would have a positive impact. But, if the state can't maintain fiscal stability, those programs won't be sustainable long term. Instead, lawmakers must prioritize spending to ensure there is a safety net for those who need it, and that we make smart investments in areas that foster future economic growth. Greg Bordonaro Other Voices Three priorities for Congress in the lame duck session By James T. Brett A fter a long and brutally divisive election season, Congress now returns to Capitol Hill for the final weeks of the 118th Congress, often referred to as the "lame duck session." After a historically unproductive two years, their to-do list remains long. However, a looming Dec. 20 deadline to pass legislation to continue to fund the government presents an opportunity to incorpo- rate a variety of other pieces of legislation. There are three proposals in particular that The New England Council believes are critical to economic prosperity and quality of life in the region, and remain our top legislative priorities for the remainder of 2024. Extending telehealth flexibilities Congress recognized the critical role of telehealth in healthcare delivery by expanding coverage during and after the COVID-19 public health emergency. Most recently, the Consolidated Appropriations Act of 2023 extended several Medicare telehealth flexibilities through Dec. 31, 2024. Among these was a provision allowing patients to use telehealth regardless of where they are located. These short-term extensions have been important to expand access and ensure continuity of care. We know that telehealth has been particularly beneficial in ensuring access to much- needed behavioral health services, and has enabled patients in rural and underserved areas to receive quality healthcare services. However, without Congressional action, these flexibilities will expire at year's end. Fortunately, the House Energy & Commerce Committee has advanced bipartisan legislation that will extend these flexibilities for another two years. The New England Council supports this extension, and encourages Congress to consider making these flexibilities permanent. Affordable Connectivity Program Established by the Bipartisan Infra- structure Law passed in late 2021, the Affordable Connectivity Program (ACP) ensures that all Americans have access to high-speed internet, which has become vital to economic success in the 21st century. Administered by the Federal Commu- nications Commission (FCC), the ACP provided a monthly subsidy of $30 for eligible households to use for broadband internet. It also provided a one-time $100 benefit toward the purchase of a tablet, laptop or other device that facilitates internet access. Since its launch in December 2021, the ACP helped more than 23 million American households gain access to affordable broadband, including over 186,000 here in Connecticut, and over 800,000 across the entire New England region. Unfortunately, funding for the program ran out in April 2024. Bipar- tisan legislation has been introduced to infuse another $7 billion into the program, and we are hopeful that this provision will be included in any year-end spending package so that we do not lose ground in the effort to ensure digital equity for all Americans. eDelivery A third top priority is passage of legislation that would make elec- tronic delivery – or "eDelivery" – of financial statements and disclosures the default method of delivery to investors. Bipartisan legislation passed the House earlier this year as part of a larger capital markets package, but has languished in the Senate. Not only is eDelivery more environmentally friendly as it decreases paper usage and waste, but it is also a much more secure and efficient method for delivering sensi- tive financial information to investors — particularly amid widespread reports of postage delays and thefts. Perhaps most importantly, eDelivery is preferred by consumers. A July 2022 survey conducted by the Secu- rities Information and Financial Markets Association found that 79% of retail investors already participate in eDelivery programs, and 85% are comfortable with eDelivery being the default. Congress should heed their constit- uents and include this practical update in any year-end package. All three of these proposals repre- sent common sense solutions, and perhaps more importantly, they all have strong bipartisan support. The New England Council will continue to urge our leaders in Wash- ington to consider these proposals as key deadlines to advance legislation fast approach. James T. Brett is the president and CEO of The New England Council, a regional alliance of businesses, nonprofit organizations, and health and educational institutions dedicated to supporting economic growth and quality of life in New England. James T. Brett

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