Lawmakers heard arguments Monday against what critics say will be a disastrous new system of fiscal restraint in Connecticut. As the law stands now, bonds issued by the state from the middle of next month will include a guarantee to the bondholder - a so-called bond lock.
The bonds will include a covenant promising that the state of Connecticut won’t make any changes to three key fiscal restraints - the state spending cap, the bond cap, and the volatility cap - for ten years.
Ellen Shemitz, executive director of Connecticut Voices for Children says she’s deeply worried about what that means for the way the state will manage its finances.
“That’s effectively saying that we are going to move decision-making from democratically-elected representatives to Wall Street,” she said. “We have to delay that, we have to study it. There’s questions about it constitutionality on the one hand, on the other hand there are huge questions about what it means for the fiscal future and stability of our state.”
Shemitz said the bond lock will hamper the state’s ability to invest in the economy or even pay down debt faster than expected. She describes it as tying the hands of the legislature.
Its supporters in the legislature say the bond lock will impose fiscal discipline on the state while still allowing lawmakers some discretion. Exceptions could be made to the bond lock if the governor and three-fifths of the legislature agree.
“There’s no question that legislators who created the bond cap and the volatility cap definitely were seeking to impose levels of fiscal restraint -- and that’s what’s behind the constitutional spending cap,” said Shemitz. “There are problems in the way they were drafted. They are problems that we believe the legislature can address. It can do so next session, but only if they are not written into bond covenants because of the bond lock.”
