HARTFORD (Reuters) – Connecticut, home to hedge fund billionaires alongside cities mired in poverty, is racing against the clock to pass a budget or face further spending cuts to education and municipal aid across the state.
Nearly two months without a budget, Connecticut is getting crushed by a burdensome debt load that has squeezed spending and amplified legislative discord.
State lawmakers must agree on a biennial budget soon or else Governor Dannel Malloy’s executive order to slash state aid to municipalities and eliminate school funding for some districts will go into effect in October. The state faces a $3.5 billion deficit over the next two years.
Among the wealthiest in the United States, Connecticut has been strained by already high taxes, outmigration, falling revenues and $50 billion of unfunded pension liabilities.
Some $23 billion of outstanding municipal debt has also constrained spending. Bondholders must be paid ahead of most other expenses like non-essential services and payments to vendors.
The $2.85 billion of principal and interest the state paid on its bonds in fiscal 2017 was the highest in six years, according to preliminary unaudited information from State Treasurer Denise Nappier’s office that has not yet been published.
“The state invested in the wrong things for a period of time. It allowed its higher educational institutions to suffer while it sought to placate communities with respect to other forms of local reimbursement,” Malloy told Reuters during an interview in his office on Thursday.