As ŗ£½Ē»»ĘŽ lawmakers negotiate a new state budget this legislative session, it seems that one term keeps coming up: āfiscal guardrails.ā
Wait, fiscal ā¦ what?
We get it. āFiscal guardrailsā is a term that doesnāt exactly roll off the tongue. But in terms of bureaucratic speak at the state Capitol, āfiscal guardrailsā is actually pretty descriptive.
Enacted by ŗ£½Ē»»ĘŽ lawmakers in 2017 and in 2023, the guardrailsā basic purpose is simple: to control spending and help develop a balanced budget.
The āguardrailsā keep ŗ£½Ē»»ĘŽās finances on track. (Get it?)
At least, thatās the idea. But the reality is more complicated.
Some lawmakers have praised the guardrails for helping to stabilize state finances and set off budget surpluses. Others say the controls are starving critical resources from those who need it in sectors like education and health care.
Hereās what to know about fiscal guardrails, and why lawmakers arenāt likely to stop throwing around that term anytime soon.
It all comes down to the budget (and caps, caps, caps)
While Lamont didnāt explicitly address changing the guardrails in his recent , he did allude to what he viewed as its positive impact.
āAnd by paying down these legacy costs, we have made state employee pensions more secure and we have freed up hundreds of millions of dollars in our budget to expand access to affordable child care, affordable health care, and expanded education opportunities,ā Lamont said. āAnd we are just getting started.ā
The guardrails have four main components, or ācaps.ā Hereās what they are.
- Spending cap ā Limits state spending by restricting the legislatureās authority to make appropriations, according to .
- Bond cap ā Limits how much the state can borrow.
- Revenue cap ā Limits projected revenues that lawmakers can allocate.
- Volatility cap ā Limits the amount of revenue that lawmakers can allocate from volatile sources (such as ).
Zach Liscow is an economist and professor at Yale Law School who recently co-authored a breaking down the history, and the efficacy, of the stateās fiscal guardrails. He said one of the more updated rules is the volatility cap, for not spending too much when the state has a really good year.
āInstead, it can be put into the rainy day fund [to] help fund the pensions that will help us get out of the debt hole that ŗ£½Ē»»ĘŽ has long been in,ā he said.
The report, from the Yale Tobin Center for Economic Policy and the ŗ£½Ē»»ĘŽ Project, says the constraints have helped build up ŗ£½Ē»»ĘŽās surplus, and helped pay down the stateās pension debt.
Still, thereās a lot more work to do.
A report from The Pew Charitable Trusts found ŗ£½Ē»»ĘŽās pension costs are still among the highest in the country, mostly because of decades of debt, .
Why it matters now
As ŗ£½Ē»»ĘŽ assigned the last of its American Rescue Plan Act (ARPA) funds last year, there was already concern about lack of state funding for education, health care and social services.
One example? The stateās low Medicaid reimbursement rates. A new ŗ£½Ē»»ĘŽ health services for low-income residents.
āPeople in need are struggling to get behavioral health, dental and basic medical service,ā said Gian-Carl Casa, president & CEO of CT Community Nonprofit Alliance. āItās time to properly fund services. ŗ£½Ē»»ĘŽ can save, pay off debt and fund essential services. We have the money.ā
Education is also a priority of Democratic leadership this session. But whether those funding challenges can be solved without adjusting the guardrails?
āWe'll have those conversations,ā House Speaker Matt Ritter said Monday at a Capitol press conference.
Study suggests room for change
Luke Bronin, the former mayor of Hartford and a co-author of the Yale report analyzing the guardrails, says the data also shows thereās room to change the policy.
āThey've taken that revenue off the table for investment in maintaining the current services, or investing in the state and families and communities today, or in other types of future oriented investment.ā he said.
Bronin said the data shows that with no more federal pandemic relief left to allocate, not adjusting the guardrails could mean big cuts for core services in ŗ£½Ē»»ĘŽ.
What we do know: lawmakers are going to keep talking about it, especially as committees debate bills, and Lamont unveils his budget proposal by Feb. 5.
