As the new governor of the state of New York, Andrew Cuomo has pledged to freeze the salary increases of state employees, veto any increase in personal or corporate income taxes, and impose a state spending cap.
Dan Malloy, who will be sworn in as the next governor of Connecticut on Wednesday, hasn’t pledged anything of the sort.
Both states face calamitous budget shortfalls in 2011 and for years to come. Both states regularly flirt with being the top taxing state in the country already. Andrew Cuomo, at least, has been frank about making thrift a priority, much to the dismay of hundreds of thousands of state employees who may not see an salary increase all year, and 900 others who were just laid off. Cuomo expects to use other spending decreases to correct budget deficits, rather than use higher taxes to increase revenue.
It’s less clear what Malloy has in mind. Unlike Cuomo, he has made no promises about his state’s taxes going up or down. Take a trip to the policy section of Malloy’s campaign website (which is suspiciously un-navigable from www.danmalloy.com), and you’ll see phrases like “address the balance of state and local taxation,” or “relieve the local property tax burden,” but nothing explicit about taxes being lower.
That could be because Malloy won’t make taxes lower for everyone, and doesn’t want to say who’s going to be hit with a hike. Restructuring the tax code or relieving the tax burden for certain demographics doesn’t necessarily imply a tax cut. For instance, Malloy could raise taxes on the wealthiest of Connecticut’s residents, thus lowering the tax burden, or share, for lower- and middle-income families without actually lowering their taxes.
Malloy has been at pains to keep tax hikes on the table without making them sound inevitable. "I want to be very clear: We're not going to raise taxes,” Malloy said in the final gubernatorial debate in October. “That is the last thing we will do…if we have to, and only then to protect the safety net." By “safety net,” Malloy means social services and health care that the state provides for the poor, elderly and disable. And when he says "if we have to," it's unclear how big an "if" that is.
Though Malloy (and every other politician in 2010) has railed against out of control spending and the need to get one’s fiscal house in order, he’s also been up front about plans to borrow cash to invest in infrastructure projects.
“I believe that infrastructure investment is long overdue, it primes the pump, and it puts people back to work. All eight of the downturns since World War II, we were led out of by construction," Malloy told The New York Times. "Yet we elected people to Washington who don’t believe it’s an appropriate tool to use. I want to be very clear: I believe it is."
Malloy insists that investments will be strictly targeted toward those projects capable of generating the most revenue and employing the most people. Regardless, the promise of more government borrowing and spending does little to help Malloy’s case that taxes won’t go up.
The backing Malloy received from labor unions during the campaign raises more questions about how Malloy is going to make everybody happy. When Cuomo was on the campaign trail, he singled out labor unions as budget-busters that would lobby aggressively and run negative ads against any governor who targeted them for spending cuts. Freezing state employees’ salaries wasn’t going to lose Cuomo too many friends. On the other hand, the Service Employees International Union (SEIU) spent $400,000 campaigning for Dan Malloy last year, and Connecticut labor leaders have sounded generally optimistic about working with the new governor. Were Malloy to change tack and adopt a Cuomo-style approach to cost-cutting, you can bet he’ll take more heat for burning the bridge.
Lastly, while Cuomo has proposed giving New York’s government a spending cap, analysts are predicting that Malloy may circumvent Connecticut’s. In the absence of significant spending cuts, Malloy will have to do some legislative finagling to get around the cap that was set by the state in 1991.
How Cuomo and Malloy fare as first-term governors will tell a great deal about their respective approaches to balancing state budgets. Connecticut and New York, already in critical fiscal condition, may turn out to be models of what state governments should and should not do to restore economic stability. As more and more states face rough seas ahead, it remains to be seen which course is worth following — and what Dan Malloy’s course ultimately will be.