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Among The Richest States In The Nation, Now One Of The Last To Adopt A Budget

Aug 8, 2017

Barbara Deindorfer lives in North Stonington, Connecticut. The 52-year-old cares for her older brother John, who has severe intellectual disabilities. She became the full-time caretaker for her brother two years ago, when her mother died. 

“We were left in a situation, really, where we were lost,” she said. “I was trying to work, I was trying to take care of the kids. John was a handful.”

She reached out for help, but it was several months before she was able to locate a daycare service for John.

“I remember the exact moment, and this voice came on the phone. I can’t say it without crying, because she said — look, I just want you to stop, and I’m going to take care of you. It's going to be alright,” Deindorfer said.

The service she found was through a nonprofit called The Arc, which contracts with the state of Connecticut to provide care for people living with developmental disabilities. But now the state may cut funding for the service.

Connecticut is one of the richest states in the nation. It has the highest per capita income in the U.S., and many of the nation's hedge fund managers are based here. And yet Connecticut is facing down a multi-billion-dollar budget gap for state services in the next two years.

“It’s no longer: what services do we want to provide? It’s: what services can we afford to provide?” said the Speaker of the House of Representatives, Democrat Joe Aresimowicz.

Speaker of the House of Representatives, Joe Aresimowicz
Credit Ryan Caron King / WNPR

He said the state’s current $5 billion budget gap is the result of eight decades of financial mismanagement in Hartford, with politicians failing to put money away to meet the pension bill for state employees, combined with a delayed recovery from the great recession that has eaten into tax revenues.

“We’re paying for previous sins, and both political parties, executive branch, legislative branch --we’re all guilty, but now it’s time to pay, and that’s our problem,” Aresimowicz said.

With those bills coming due, social services look likely to be hit hard.

State employees have also had to give back — a recent agreement negotiated with unions could see $1.5 billion cut from the state’s labor expenses over the next two years. But Republicans in the legislature want to limit collective bargaining, and cut pension benefits even more.

Darnell Ford is a union member and state worker.

“Middle class workers have done their part, by saving the state billions of dollars,” he said at a recent rally in Hartford. “Now it’s time for our legislators to do their part, by asking the billionaires and corporations to do the same.”

Bruce McGuire, president of the Connecticut Hedge Fund Association.
Credit Harriet Jones / WNPR

Bruce McGuire represents some of those billionaires, as president of the Connecticut Hedge Fund Association. He said that the several hundred funds centered in and around Greenwich manage about $750 billion in assets.

“Connecticut is actually the third largest center globally of the hedge fund industry behind only New York City and London,” he said.

Some lawmakers have been eyeing that potential piggy bank. A bill in the legislature this year would have taken aim at what’s known as the capital gains tax loophole, because fund managers pay taxes on their earnings at a much lower rate than income tax.

McGuire said there’s an issue with that.

“This is not a heavy industry,” he said. “We’re not talking about big plants and heavy equipment — we’re talking about people with cell phones and Bloomberg terminals, that can be very portable.”

He said there would be no better way for Connecticut to encourage hedge funds to decamp to another state, than to consider what the industry would see as punitive tax measures.

"I don’t know that it’s right to single out one particular type of professional and identify them as either the cause of the problem, or the answer to your problem that they didn’t create, just because they happen to be highly compensated," he said. "That doesn’t appear to me to be the American way."

McGuire said nurturing high wage industries that spin off economic growth should be Hartford’s priority as it grapples with its budget problems.

And it appears his message is gaining traction.

Speaker Aresimowicz said he’s dubious that the wealthy are really fleeing this state, but raising their taxes is a political non-starter, even in this traditionally blue state where the gap between the rich and poor is one of the widest in the nation.