Face the Facts: Breaking down the state's budget surplus

Connecticut has set records in how much we have saved in recent years.

Year after year, we've had a billion dollars or more in surplus in the state budget, except for 2020. That was the only year that didn't.

So are we saving too much? Many Democrats and nonprofits who administer the social programs in our state say yes, but the governor and state Republicans disagree.

Is there some kind of middle ground to be found as we approach the new legislative session?

NBC Connecticut's Mike Hydeck spoke with Republican leader in the Senate, Steve Harding from Brookfield.

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Mike Hydeck: Senator, good morning. Good to see you. Happy New Year. Welcome back. So let's start with the spending rules. It's been a lot talked about, the guardrails, maybe the volatility cap, depending on which one you look at. Do they need to be adjusted? In your mind?

Stephen Harding: No, I don't believe so. I think that there's enough adjustment, there's enough flexibility within the current confines of the fiscal guardrails to be able to spend increased investment. I mean, there's about $900 million, almost a billion dollars, that can be used by the legislature in this upcoming budget year to expand on continued investments and also abide by the fiscal guardrails. So I really see no reason as to why we should be adjusting them now. They've also led to record savings. They've led to record pay down of our debt. We're still the second highest debt per capita in the country. We still have far more to do in terms of debt paid down. So with that in mind, I think there's really good reason for us to stand by those guardrails.

Mike Hydeck: So there's $900 million in addition to the projected surplus? There's $900 million that's spendable now?

Stephen Harding: That is correct.

Mike Hydeck: And where's that? Where's that money?

Stephen Harding: Well, I mean, it is from inflation purposes and the calculations that the fiscal guardrails afford us. And so the argument that I'm making is that there was a lot of foresight to the fiscal guardrails that were put in place in 2017. It does give us additional ability to spend more money based upon inflation, and that money is being afforded to us now in the legislature to pay. So really, what those that are saying, basically, the Democrats and legislators are saying, is that, by expending more than $900 million really, we're looking at tax hikes. There's no other way you're going to be able to spend that additional money without increasing taxes, in my mind.

Mike Hydeck: So with so many people saying, 'look, we've been underfunded for years,' inflation is horrible. Like, for example, that we still need lots of daycare slots across the state. That's one of the things that people say, that maybe that's where some of the money should go. They believe moms and dads getting back to work are going to help the workforce. Do you think that's going to be one of the targets for that $900 million or?

Stephen Harding: Absolutely, it should be. I mean, you're hard pressed to find a bigger priority than something like that. I think educational investment is always going to be a top priority as well. So there is money to expend in continued investment. Nonprofits is another area, and one of the problems that we had in the ARPA funding that we voted, many Republicans voted against, was that it was spent towards one-time funding, or it was one-time funding being spent for towards operational expenses. So you're going to see nonprofits come back and ask for the same allotment of increased investment as well. So there's going to be a lot of different agencies, no doubt, looking for continued investment. I think we do have some money to expend, but we have to do it within the confines of the guardrails. I think that the people of the state of Connecticut resoundingly support those guardrails. It's led us to the good fiscal shape that we're currently in today. It also avoids the tax increases that we saw not too long ago in the years past.

Mike Hydeck: And they voted to overwhelmingly extend, both sides of the aisle.

Stephen Harding: That's exactly right. Unanimously.

Mike Hydeck: So the interesting thing is, so Keith Phaneuf, budget guru, Connecticut Mirror, talked about, look, when these guardrails went in place in 2017, he did some research. This was a year that tax receipts were abnormally low. So he thinks that it should be adjusted, at least to a modern day tax level. What's your take on that?

Stephen Harding: I think again, the fact that we have almost a billion dollars to spend in increased investment speaks to the fact that they were crafted in a manner in which we recognize the fact that we're going to increase investment, but at the same time abide by fiscal responsibility. So I understand what Keith is saying. I think he has a strong argument to make, but with that said, looking at the facts as we have them now, you have $900 million that we can spend on increased investment. Anyone telling you that we need to rip apart the guardrails is telling you that we need to spend more than $900 million in increased funding. And really, I don't find any other way that you can reasonably do that without raising taxes. So they're basically saying we want to raise taxes.

Mike Hydeck: So Martin Looney, the Democrat in the Senate, leading the Senate, is among the people that said, 'Look, we need to have this discussion.' One of the other things that's out there is when this happened in 2017, it sort of happened, kind of behind closed doors, by comparison. What's your thought on having this with more sunlight? The discussion in an open forum on committees and with cameras and microphones?

Stephen Harding: I think that honestly, any modification to the guardrails would have to be done in the light of day and discussed openly and given the proper legislative process. With that said, my position as of today is not changing, and so we can go ahead and have that discussion. I think I'm always open to having a discussion, but I still stand by the fact that the fiscal guardrails has led us to where we are today, and if we move away from them, we're going to simply raise taxes on the people of the state.