Connecticut's fiscal crisis was front and center when State Rep. Gail Lavielle (R-143rd) faced-off against her challenger, Democrat and current Wilton Selectman Ted Hoffstatter, during a lengthy candidate's debate held Wednesday, Oct. 24, at St. Peter Lutheran Church in Norwalk. The recently redrawn 143rd District includes most of Wilton, East Norwalk and, for the first time, a sliver of Westport (west of the Saugatuck River).
Roughly 30 people attended the 90-minute-long debate, which was sponsored by the Norwalk League of Women Voters and moderated by league member Lauren Rosato. Altogether the candidates fielded about 15 questions on topics ranging from education to same-day voter registration to same-sex marriage — but a majority were focused on fiscal matters, in particular taxes and the state's budget deficit.
When asked what, if elected, he would do to make the state's current tax structure more equitable for businesses and individuals, Hoffstatter, a third-term member of the Wilton Board of Selectmen, said "you can't talk about taxes without talking about the budget." He said Gov. Dannel Malloy's administration has made great strides in reducing the state's $3.2 billion budget deficit, having cut government spending by $1 billion, mostly through consolidation; saving $1 billion through union concessions; and raising an additional $1 billion in tax revenue in the past year to reduce the budget deficit to about $146 million.
"And fiscal year 2013 is projected at $26 million," Hoffstatter said of the budget deficit. "So this trend is heading in the right direction — it's relying too heavily taxes, yes, but we also have to realize that we have the highest per capita debt in the nation and 17 percent of our budget goes to debt service."
Hoffstatter, a lifelong Wilton resident and graduate of Wilton High School and Sacred Heart University, said the solution to the state's budget gap is to attract businesses, which in turn will generate revenue. But in order to do that the state must have a "game plan" that includes "setting aside money for tax incentives, express loans and tax breaks as well as economic development," he said.
"In Wilton we [recently established] an economic development commission that makes a focused effort to target businesses and make the town more business friendly," Hoffstatter said. "We need to do the same thing on the state level."
Lavielle, who was elected in 2010 and serves on the General Assembly’s Appropriations, Education, and Transportation Committees, disputed Hoffstatter's budget figures.
"The biannual budget that passed in 2011... actually increased taxes by more than $3 billion," she said, "and it did not decrease spending by one cent — in fact it increased it by more than $1 billion — it went from about $19 billion in 2010 to about $19.8 billion in 2011, to about $20.2 billion in 2012. There may have been some cuts but they were supplanted with something else because those budgets get bigger every year."
Lavielle, who also sits on the Higher Education Consolidation Committee and is a member of the Long Island Sound Caucus, said she would work to reduce or repeal some of the "punitive taxes" included in the recent budget — like the tax on clothing and shoes under $50 and the tax on over the counter drugs — which have had the affect of driving businesses and people out of the state.
"Tax policy is the primary thing that will attract businesses here... or drive them away... " she said.
The two candidates — who previously faced-off in a debate on Oct. 10 at Earthplace in Westport — demonstrated they have different philosophies when it comes to attracting businesses to the state: Hoffstatter said Connecticut needs to "pave the way" for growth by identifying the types of businesses it wants to have come here by offering them incentives to relocate — staying essentially on the same path set by the current administration — while Lavielle said she would prefer a more organic approach to growth by reducing spending, lowering taxes and making the state's economic environment attractive to all types of businesses, so as to avoid "picking the winners and losers."
When asked how he feels about the Gov. Malloy's "First Five/Next Five" business incentive program — a chunk of which will be used to fund investment firm Bridgewater Associates' move from Westport to Stamford — Hoffstatter said "I think it is important to keep our businesses here in Connecticut — and we should be thinking about what businesses we keep here."
"There are some larger businesses, such as the WWE, which have received millions in corporate welfare when, quite frankly, they didn't seem to need it," he added. "We need to focus on keeping small businesses here and attracting new ones."
Lavielle said when the Governor's First Five initiative was first introduced, as part of the jobs bill signed into effect during special session in Oct. 2011, it was "supposed to be limited to five businesses — 200 jobs each — to jump start the job creation effort."
"It's gone beyond that," she said, "and given the choice between creating a favorable environment, with favorable tax policy, no new mandates and non-burdomsome regulations, and just giving money away, I'd take the former any day. I don't think giving money away and cherry picking is a way of getting the economy going."
Lavielle said "this type of cherry picking is like investing in five companies for your retirement... and that's it."
"You must diversify — you must spread your risk — and in this case creating a favorable environment and tax structure for businesses is a better policy, and a far better investment of taxpayer resources, than just giving money away to a handful of companies," she said.
When asked how she would reduce Connecticut's 8.9 percent unemployment rate, Lavielle said she would work to create a favorable environment for businesses to flourish.
"I've spoken to many business owners and the main thing most of them bring up is, get the fiscal house in order and shrink the size of government, because if you do that you won't be consistently beating us up for more and more taxes," Lavielle said, adding also that the state changes its tax policies too frequently, making it difficult for businesses — who typically plan five to ten years out — to decide where to locate their operations.
As an example of an unfavorable business tax, Lavielle said the biannual budget includes a "10 percent corporate tax surcharge that was supposed to sunset in 2011 — instead this new budget doubled it to 20 percent."
"Plus there are quite a few other payroll taxes and other expenses that make running a business here very costly," she added. "So if we can find a way to get control of the spending side, and bring taxes down, that will enable us to attract businesses, and that way we expand our tax base and increase our revenue. It's not a question of the government creating jobs for people — it's a question of the government creating en environment for businesses where they will come and stay and hire people as they succeed."
Hoffstatter said Connecticut "is not like North Carolina or South Carolina" in that it is "mostly built out" and there are fewer locations where new facilities can be constructed. For this reason the state should be "mapping out" its business future and targeting companies in growing sectors such as biotech and fuel cell development, he said.
"We have to help pave the way for Connecticut's economic future," Hoffstatter said. "It's not going to happen by accident — we have to have a game plan. We need to think a little like venture capitalists — we have to look at where the opportunities are."
When asked how the state should handle its unfunded pension liabilities, Lavielle said "right now they total $40 billion — and if we were using GAAP accounting, which the private sector must use, and which the governor said he would like to use, we would be at about $60 billion."
"If we do nothing [about the ballooning pension liabilities], a number of things will eventually happen," she said. "It will become necessary to raise taxes exorbitantly; there will be cutbacks in essential services; and even some people who think they are due pensions won't get them because we won't be able to afford them."
"So what can we do? I suggest we look again at the state employee contracts," she said. "Because at the moment what is happening is not sustainable. Under the new budget people were guaranteed a 10 percent raise over the next four years — they also had their current contract with the best healthcare benefits in the country — even better than the federal government — extended to 2021."
"We need to have employees increase their contributions to these programs — and, as a note, teachers already contribute 6 percent of their pension benefits, and hazardous duty workers 5 percent — but the state's unionized employees only 2 percent," Lavielle continued. "If we cannot negotiate to do all this, then perhaps we will have to do it by state statute, because the state simply cannot afford to continue accumulating these obligations."
Hoffstatter said having been a teacher for a number of years, he understands the importance of unions, but at the same time having served on the Wilton Board of Selectmen, "I recognize that pensions can be one of the biggest drivers of tax increases."
"As a teacher I believe in unions — but at the same time as a member of the Wilton Board of Selectmen I was very outspoken, when the teacher's union went to negotiate, that they take a pay freeze," he said, adding that when negotiations failed between Gov. Malloy's administration and the unions, shortly after he took office, he threatened 5,000 pink slips and managed to get the unions back to the table, resulting in concessions.
In her rebuttal Lavielle said the nonpartisan office of fiscal analysis cannot verify that even half of the $1.6 billion in savings promised by the Malloy Administration through concessions have been realized to date.
"In that program of savings there was, for example, a line item that said $180 million would be saved over two years through suggestions in an employee suggestion box," Lavielle said. "We still have not seen any of those. The savings simply are not coming through at the rate at which they were promised."
Hoffstatter said when it comes to spending "I can honestly say that I am probably the most fiscally conservative member of the Wilton Board of Selectmen."
"I have yet to see a budget where we couldn't find more cost savings," he said. "I've called for across-the-board pay freezes for all town employees and unions until we come out of this stagnation. Now, both Democrats and Republicans have told me 'you can't do that, it hurts morale' ... but I said, 'well my neighbor, who struggles in his job to live in town support his kids, that hurts his morale.' Spending is obviously something that needs to be brought under control — but there are smart ways to do it and not smart ways to do it. We have to do it carefully."