On September 17, at the Shubert Theatre, two blocks from Old Campus, Democratic gubernatorial candidate Ned Lamont took the stage for his second general election debate. Dressed in a crisp suit, not a hair astray, Lamont looked equal parts politician and businessman. Standing in front of televisions emblazoned with a large American flag, he battled Republican nominee Bob Stefanowski for almost an hour. Lamont fielded jab after jab about his privileged upbringing and his similarity to former governor Dannel Malloy, who left office with a 24 percent approval rating, but he remained undeterred. Despite the debate’s laser-like focus on Connecticut’s economy and budget, Lamont did not offer any specifics about how to solve the state’s fiscal crisis. Instead, he spun a cohesive narrative about his business acumen, a philosophy of inclusive governance, and a promise to fix Connecticut’s ills.
On November 6, Lamont beat Stefanowski by forty-four thousand votes. He now faces a state budget $2 billion in the red, with billions more of debt anticipated in future years. Although the state’s economy has improved since the Great Recession, it lags significantly behind other New England states. How did Connecticut end up in this fiscal predicament? And what, if anything, can Lamont do about it?
In the latter half of the twentieth century, Connecticut’s economy shifted from manufacturing to finance. Companies like General Electric and Aetna, as well as more than four hundred hedge funds, fled bigger cities for Connecticut’s green pastures and favorable business climate. By some measures, Connecticut became the richest state in the nation.
But as the economy boomed, irresponsible money management doomed the state’s financial future. Connecticut’s public pension program was established in the late 1940s, but administrators didn’t add a single penny to it until 1971. When the state income tax was instituted in 1991, none of its revenue was used to pay off the state’s pension debt. Today, Connecticut’s program is the fourth-most underfunded of any state, and accounts for the majority of its debt.
David Schleicher, a Yale Law School professor who studies state finance, said that Connecticut politicians have long adhered to a “let-the-good-times-roll” philosophy, failing to fund benefit programs and assuming that continuous economic growth and a robust tax base will allow the state to catch up later. Today, “unfunded liabilities” — existing debts from state employee pensions, healthcare plans, and other debt bonds — account for more than half of Connecticut’s budget, and their cost is growing. According to Bruce Alexander, former vice president of Yale’s Office of New Haven and State Affairs, these liabilities now total around $100 billion, while Connecticut’s annual revenue is only $20 billion — the fourth worst pension underfunding in the country.
“The people who ran Connecticut for decades didn’t pay for the services they received,” said Schleicher. “If I could wave a magic wand, I would make people angry at the politicians representing their parents. That’s who did it.”
As debt continued to climb, the 2008 recession hit Connecticut’s economy hard — Malloy advisor Roy Occhiogrosso described the recession as the ‘icing on the cake’ of the state’s budgetary problems. Connecticut has raised taxes three times since 2009 in an effort to raise revenue; today, it has the second-highest amount of overall taxes per capita in the country. But the plan has backfired. According to statistics from the Department of Labor, Connecticut’s total economic output has declined by 3.3 percent since 2010. New York and Massachusetts both saw growth rates of over 10 percent during the same period.
In response, people and companies fled. Three billion dollars’ worth of citizens’ income left just between 2015 and 2016, and high-profile companies like General Electric have exited the state. This exodus has led to a decline in tax revenue, forcing Connecticut to chop subsidies and economic programs. Today, the state has the second-widest income gap in the country. For the past twenty years, Connecticut has consistently ranked among the five states with the fewest jobs created. And it now faces a $4.2 billion biennial budget deficit.
Joe Brennan, the CEO of the Connecticut Business and Industry Association (CBIA) pointed to the budget as one of the main drivers of business exodus from the state. “The biggest single factor has been the state’s fiscal condition — we’ve had ongoing budget issues with recurring deficits in the billions of dollars,” he said. “That makes it much more difficult for investors to have confidence in Connecticut.” In short, Connecticut cannot improve its economy until it gets its budgetary house in order.
“Lamont is a man of contradictions. He’s played the political and business underdog, the leader of the last-seeded team who defies all odds to win, and yet he possesses a privileged background few can match.”
Among many areas where the deficit has forced cuts is the state’s education system. In 2017, the Connecticut General Assembly reduced education spending for the first time in over a decade. A Connecticut Mirror analysis revealed that over 1,700 school district jobs were cut statewide that year. New Haven Superintendent Carol Birks, appointed in 2018, was immediately tasked with closing a $19.3 million deficit. She initially planned on firing around 1,000 part-time employees but after a public outcry, she instead laid off twenty-eight full-time employees. With Connecticut’s budget deep in the red, the situation statewide looks grim.
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Enter Lamont, Greenwich cable television entrepreneur and twice-unsuccessful Democratic candidate for statewide office. Lamont is a man of contradictions. He’s played the political and business underdog, the leader of the last-seeded team who defies all odds to win, and yet he possesses a privileged background few can match. He is a fourth-generation graduate of Exeter and Harvard, the progeny of a long line of successful financiers. Following a brief stint after college as the editor of a small newspaper in Ludlow, VT, Lamont attended Yale School of Management and then made a fortune as the founder of Campus Televideo, an upstart college campus television company. Throughout the campaign, he framed his start in business as a David and Goliath story: the little guy took on the monopolized industry titans — and won.
Before he was elected governor, Lamont had held political office for just two years — from 1987 to 1989 — as a member of the Greenwich Board of Selectmen. But he has immersed himself in Connecticut politics over the past twenty years. Breaking away from his old-money Republican family, Lamont registered as a Democrat. In 2006, he challenged U.S. Senator Joe Lieberman from the left in the Democratic primary, relentlessly criticizing Lieberman’s support for the Iraq War, and shocked everyone with a win. Headlines hailed Lamont as a progressive darling, but Lieberman ran as an Independent and avenged his primary loss in the general election.
After an unsuccessful run for governor in 2010, Lamont entered the race again last year and, in some sense, won by default. Although more than twenty-five candidates ran, few prominent Connecticut politicians were on the ballot, likely because of the tremendous financial difficulties and unpopular decisions any new governor would confront. Lamont was a popular face, and he poured $12 million of his own money into the campaign, cruising to victory.
Now, with the state’s economy reeling, the future of Connecticut and its residents may depend on the budget for the next two years, which Lamont is scheduled to present to the legislature by late February.
What options does Lamont have to confront this crisis? According to Colin McEnroe, a radio host and political commentator on Hartford-based WNPR, Lamont has three ways to balance the budget: increasing revenue, cutting spending (which could mean scaling back crucial social services), or reworking contracts with state unions to cut back the pension and healthcare plans that remain woefully underfunded. “No responsible governor can tackle a problem of this magnitude without playing with all three of these dials,” said McEnroe.
During his campaign, Lamont avoided budgetary specifics and relied mainly on rhetoric. He touted his private-sector experience, arguing that he knew how to foster public-private partnerships and negotiate financial deals. In practice, though, Lamont’s options are extremely limited. “It’s going to be really painful,” said Schleicher, the Yale Law School professor. “There’s no magic bullet for the fiscal problems of Connecticut. There’s just a lot of suffering.”
Following the election, Lamont selected Melissa McCaw, who previously oversaw Hartford’s budget as the head of the Office of Policy and Management, as his budget director. Lieutenant Governor Susan Bysiewicz, a former state representative from Middletown who served as Connecticut Secretary of State from 1999 to 2011, said that she and Lamont are devising “creative solutions” to put Connecticut on sound fiscal footing without increasing taxes. She pointed to marijuana legalization and sports betting as two potentially significant sources of revenue, estimating they could together bring in $175 million every year. This sum, however, is an order of magnitude lower than the roughly $2 billion needed to close the deficit.
Bysiewicz also pointed towards a number of progressive policies — paid family leave, a $15 minimum wage, equal gender pay — that she hopes will attract young people to the state and revitalize the economy. “I’ve worked in Connecticut all my life. My two kids are in New York City,” she said. “We need to find ways to attract young people to the state.”
“The people who ran Connecticut for decades didn’t pay for the services they received,” said Schleicher. “If I could wave a magic wand, I would make people angry at the politicians representing their parents. That’s who did it.”
Lamont and Bysiewicz are searching all over for places to reduce spending. In his first State of the State Address on January 9, Lamont indicated he may try to seek big savings by regionalizing some services, such as fire departments, that are currently provided by each town; cutting state aid to cities; and attempting to rework the aforementioned state union contracts. When Bysiewicz and I spoke, she outlined a series of proposals to cut costs, including seeking more competitive contracts for state construction project bids, implementing policies to reduce nursing home costs, and continuing ex-Governor Malloy’s “Second Chance Society” program, which sought to reduce Connecticut’s prison population by lessening penalties for drug possession and enacting more lenient protocols for people charged with nonviolent crimes.
It remains to be seen whether Lamont’s business experience will translate to efficient government management and spending, as he has long promised. However, he has already shown some ability to negotiate deals with the private sector. During the recent government shutdown, he set up a partnership with local banks to provide interest-free loans to federal employees. Balancing the budget for current and future cycles may be prohibitively difficult, but Lamont has repeatedly pledged to do it. “I will present to you a budget which is in balance not just for a year, but for the foreseeable future,” he said in his January 9 address. “I come from the world of small business where the numbers have to add up at the end of the month or the lights go out.”
Lamont is slated to present his first budget on February 20, but much about its specifics are still unclear. The only thing we know for sure is that Lamont is taking on a crisis decades in the making, one fueled by incompetence, a lack of foresight, and decades of politicians kicking the can down the road. He has made a career of defying the odds, from the unlikely success of his telecommunications startup to his unexpected Senate primary victory in 2006. It remains to be seen whether the self-proclaimed underdog can pull off his biggest upset yet.
— Conor Johnson is a sophomore in Davenport College.