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With state budget in crisis, Conn. governor says history will vindicate him

Connecticut Governor Dannel Malloy. Steven G. Smith for The Boston Globe

HARTFORD — Six-and-a-half years into his tenure as chief executive, Dannel P. Malloy is the nation’s least popular Democratic governor.

He says the honor is well-deserved.

After all, he insists, it’s grimy work cleaning up years of Republican mismanagement.

Connecticut is the wealthiest state in the country, but it faces a massive budget gap and the prospect of even higher taxes and more painful budget cuts. The unemployment rate is the highest in New England, New York, and New Jersey. Economic inequality is pervasive. The state’s population has shrunk each of the last three years. General Electric’s headquarters fled for Boston. And just last week, Connecticut saw its bond rating downgraded, placing it as less creditworthy than almost every other state.


Still, Malloy, who is not running for reelection in 2018, says his time in office — with a focus on the nuts-and-bolts funding of pensions and long-deferred health care obligations — will be vindicated by history.

“I think the changes we make, people won’t give us credit for until they actually experience, until they actually see what happens,” he said.

In the meantime, he’s taking heat from business groups, fiscal watchdogs, cities and towns, and the 66 percent of Connecticut voters who disapprove of his job performance.

But in an interview this week in his office at the state Capitol, Malloy, a Democrat, described his tenure — signing two of the state’s biggest tax increases into law, restructuring a major contract with state employee unions, and plowing money into funding long-term liabilities — as cleaning up messes he inherited from his Republican predecessors.

“Connecticut’s problems aren’t recently manufactured. They exist. And have existed,” said Malloy, who won narrow victories in 2010 and 2014. “And many people enjoyed ignoring them for a long period of time and experienced great personal popularity as a result of their willingness to ignore them. And it eventually falls on someone to, you know, raise the mirror.”


Asked about a recent poll that ranked him one of the least popular governors in the country, with a job approval rating of only 29 percent, Malloy interrupted a Globe reporter.

“Well-deserved,” Malloy said.

Because he’s made hard choices?

“Because I’m making the hard choices,” the governor said, sitting in front of a wallpaper rendition of the forces of British General Charles Cornwallis surrendering at Yorktown, Va., and concluding the American Revolution.

Over the course of a 30-minute interview, Malloy exuded the argumentative directness of a New York City prosecutor — which he once was. He attacked the premise of several questions and interrupted others halfway through.

The Democrat, who turns 62 next month, expressed impatience with the media and the public’s lack of interest in the complexities of actuarial projections and pension fund returns. “It’s a very difficult situation for people to understand,” he said.

And he cast shade on previous policy makers, including Democratic legislators, for sloughing off their responsibilities.

A graduate of Boston College and Boston College Law School, and later a Brooklyn prosecutor, Malloy was the mayor of Stamford, where he served from 1995-2009. In a razor-close 2010 race for governor, he beat Republican Thomas C. Foley but faced him again in 2014.

Malloy ran that year on what he framed as his steadfast leadership in the face of crises — the mass shooting at Sandy Hook Elementary School, the remnants of Hurricane Sandy, and the state’s budget troubles. Notably during his first term, he shepherded into law some of the country’s toughest gun control measures and made them a centerpiece of his successful push for reelection.


Malloy, who can adroitly play the part of partisan attack dog, is now the chairman of the Democratic Governors Association, which spends millions to elect Democrats and defeat Republicans across the country.

That national focus has had to take a back seat to his problems at home.

Connecticut is unique. It had the highest per-capita personal income of any state, $71,033 in 2016 and is a hub for several big employers, including insurance giant Aetna Inc. and aerospace juggernaut United Technologies Corp. It has strong K-12 education, Yale University, and a robust financial services industry.

It also has a particularly thorny fiscal situation.

For decades, the state’s pension and benefits plans for state employees — and local teachers, too — weren’t properly funded. Now, Connecticut is making bigger contributions to the system, but that leaves much less money to spend on everything else.

“They’ve got a third of the budget they can’t cut,” said Marcia Van Wagner, the top credit analyst for the state at Moody’s Investors Service, one of the big-three rating agencies. That includes paying off debts and forking over cash for pensions and health care for state and local workers and retirees.

All of that is on top of the huge costs of health care for the poor and disabled.


“They’re very boxed in. They’re not getting the economic growth to pay for those costs. There’s no magic bullet,” she said. “It’s going to be a tough slog.”

Connecticut income tax revenue — of which an outsized proportion comes from the very rich — has recently fallen dramatically short of expectations. But a small tax base and recent tax increases mean there’s not much flexibility to further squeeze out more revenue, experts say. It’s a free country, after all, and people can move.

“We’re a small state,” said Joseph F. Brennan, who leads the powerful Connecticut Business & Industry Association. “So when a couple hedge fund managers decide to go to Florida, it gets noticed in your revenue receipts.”

Malloy acknowledged that the state has reached a ceiling, at least on taxing the rich.

He called it “somewhat unreasonable” to get more than 33 percent of income tax revenue from the top 1 percent of your taxpayers, as Connecticut currently does. (The top rate is 6.99 percent.)

He also noted about half of Connecticut earners currently pay no state income tax.

But, even though he’s been in office since January 2011, he framed the system as inherited from his predecessors, a word he repeated, singular and plural, several times during the interview, especially when discussing tax increases.

“Every dollar increase in taxes has gone to pay for the obligations that my predecessors didn’t fund,” Malloy said. (Before Malloy, the last Democratic governor left office in 1991 .)


Brennan, who represents thousands of Connecticut businesses, placed responsibility for the pervasive sense of fiscal crisis that scares off new investment and new talent not on any one person, but at the feet of the broader state government over many years.

He said the underlying problem is not only that another big-name company such as GE may leave, but that when companies already here open a production line or want to expand a subsidiary, they often look to do so somewhere other than Connecticut.

“Unless and until we can get our fiscal problems at least manageable,” he said, it will, unfortunately, be “the number one policy issue that you talk about when you talk about Connecticut.”

There is praise for the governor’s priorities in some quarters. Lisa Tepper Bates, who directs the Connecticut Coalition to End Homelessness, said the governor has been a staunch ally and helped protect funding for efforts to reduce homelessness.

And state workers’ unions and the governor agreed this week to a framework for rewriting their contract with big savings from worker concessions in exchange for the promise of years of job and benefit protections.

Malloy, who has seen the Democratic majorities in the Legislature erode under his watch, expressed certainty that the state would land on its feet, and he brushed aside concerns about public approbation.

“I don’t stay up at night worrying about how popular I am,” said Malloy. “What I worry about is whether I’m making real and systemic change, and that I’m doing.”

Joshua Miller can be reached at joshua.miller@globe.com.