By Dan Calabrese ——Bio and Archives--June 6, 2018
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Hey, what could go wrong?
Connecticut is in a world of hurt because its liberal politicians have never seen a dollar they didn’t want to spend, and they’re desperately looking for a way to lay their hands on $500 million just so they can stay current on the spending commitments they’ve already made.It is a rare step in the world of municipal debt. No other state has attached such fiscal austerity measures to an outstanding bond issue, according to analysts at S&P Global Ratings. The restrictions will stay in place for the next five years. The unusual offer has the potential to lower borrowing costs for Connecticut in the near term and enforce fiscal discipline following a bitter state budget battle in 2017. The covenants helped win enough support to end the stalemate. But the restrictions could also hamstring the state in the event of a future crisis. The only way to suspend certain covenants is with a three-fifths vote of the legislature and a declaration of fiscal emergency from the governor. The current governor, Dannel Malloy, is scheduled to leave office in January. “If it goes badly the cost might be really high,” said Kim Rueben, senior fellow at the Urban Institute
Connecticut’s idea reinforces the predicament facing many U.S. states as they struggle to pay for core services like education and infrastructure at a time of soaring costs for debt, retirements and health care. Pensions, retiree health insurance and Medicaid together consume about one out of every five tax dollars collected by state and local governments. Estimates of how much money they still need to pay for all future pension obligations vary from $1.6 trillion to $4 trillion. In Connecticut that shortfall is $34.8 billion, according to S&P.The obvious question is why they didn’t implement the fiscal discipline measures before. The answer, of course, is that they didn’t want to and didn’t absolutely have to, because somehow they were able to scrape together enough cash to meet all the obligations listed in the excerpt above. Only now, when they’ve run out of cash and they’re desperate for a new infusion, are they willing to talk about things like fiscal austerity. Now let me ask you a question: Do you think the same spend-happy politicians who created this mess in the first place will be able to muster a three-fifths vote to exceed the spending limits, because it’s an “emergency” or whatever? And do you think Connecticut is likely to elect another governor liberal enough to back such a move? Of course and of course. This is one of the biggest sucker’s bets I’ve ever seen.
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Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain
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