April 5, 2011
REPS. ROJAS, FLEXER SEEK TO STRENGTHEN STATE’S RAINY DAY FUND
State Reps. Jason Rojas and Mae Flexer (D-Killingly, Plainfield, Sterling) testified at the State Capitol today in support of legislation they have introduced to increase the amount of funds in the state’s Rainy Day Fund.
Currently no more than 10 percent of the state’s total budget may be put into Connecticut’s Budget Reserve Fund — more commonly called the Rainy Day Fund. Rojas and Flexer’s legislation (HB 6271) would increase the maximum deposit in the Rainy Day Fund to 30 percent.
Rojas and Flexer told the state legislature’s Appropriations Committee at a public hearing that increasing the Rainy Day Fund’s cap would help the state in the future avoid the problems of overconfidence that come along with having a “full piggy bank.”
“One of the great lessons of this recent recession is that as a state government we can be better prepared to mitigate economic downturns,” Rojas said. “That preparation can be assisted by having a larger capacity in the Budget Reserve Fund to help get us through deficit years without having to resort to unprecedented tax increases and/or spending reductions like we are facing today. The other important component to this will be that we have to develop better fiscal discipline during good times and use budget surpluses to grow the states reserves or to apply them to paying down bonding or other long term debts.”
“If we can put more money away during good times we will be better prepared to weather economic downturns,” said Flexer. “If we had been legally allowed to save more money for the many years we had a budget surplus, we would not be facing as dire a situation as we are with our current budget crisis. If we had more money in the rainy day fund, we could have avoided the current situation where some are suggesting tax increase or cuts in vital services at a time where when the need for services is greatest. The tax increases and cuts in services that we are facing could have been dramatically reduced if we had put more money in the Rainy Day fund over the last two decades.”
Flexer noted that had Connecticut had a higher cap we could have started this recession in 2008 with $2.85 billion instead of $1.47 billion (an extra $1.38 billion) in the reserve. “Even though we know the budget reserve fund will be empty for quite some time, it is imperative that we make these changes now especially as we consider revenue changes that we know will eventually lead to surpluses in the years to come,” she said.