CT BUDGET STORY

By MARK PAZNIOKAS and KEITH M. PHANEUF, The Con­necti­cut Mirror 

The Gen­er­al Assem­bly says leg­isla­tive lead­ers are poised to end Con­necti­cut’s long and bit­ter bud­get impasse in dra­mat­ic fash­ion by week’s end, unit­ing one of the nations most close­ly divid­ed leg­is­la­tures behind a bipar­ti­san com­pro­mise engi­neered to sur­vive a veto by Gov. Dan­nel P. Malloy.

Will have the vast major­i­ty of our mem­bers vot­ing in favor of this his­toric agree­ment. Hav­ing Democ­rats and Repub­li­cans work togeth­er on a bud­get has­n’t been seen in Con­necti­cut,” House Speak­er Joe Ares­i­mow­icz, D‑Berlin, said Tues­day night after a Demo­c­ra­t­ic cau­cus. “This has been a very, very impres­sive process.”

The Sen­ate is expect­ed to open debate on the bud­get ear­ly Wednes­day evening, hours after the leg­is­la­ture’s non­par­ti­san staff deliv­ers a line-by-line bud­get for the fis­cal year that began July 1. The House prob­a­bly would fol­low with a vote Thurs­day, set­ting the stage for Mal­loy to sign or veto a bud­get craft­ed with­out his direct involvement.

In sep­a­rate news con­fer­ences Tues­day, state House Democ­rats and Repub­li­cans broad­ly sketched the basis of a bipar­ti­san com­pro­mise once seen as unthink­able: The Uni­ver­si­ty of Con­necti­cut would lose about $65 mil­lion in annu­al fund­ing, more than the $50 mil­lion Mal­loy was ready to accept last month, but far less than the $120 mil­lion orig­i­nal­ly sought by the GOP.

The state’s pub­lic financ­ing of cam­paigns would sur­vive, as would the state’s port­fo­lio of green ener­gy and ener­gy-effi­cien­cy pro­grams, though the lat­ter would lose some fund­ing. Munic­i­pal aid would be large­ly pre­served, though no town-by-town num­bers were released, nor­mal­ly a pre­req­ui­site for any law­mak­er com­mit­ting to a budget.

House Minor­i­ty Leader Themis Klar­ides, R‑Derby, said her cau­cus was pleased that the bud­get deal includes ele­ments of pro­pos­als long sought by the GOP, includ­ing revi­sions to pre­vail­ing wage and bind­ing-arbi­tra­tion laws, as well as new lan­guage for caps on spend­ing and bor­row­ing by the state. Details were not released.

I think over­all peo­ple were very impressed with the his­toric amount of struc­tur­al change we got in this bud­get,” Klar­ides said after the GOP caucus.

One of the changes is a statu­to­ry require­ment that bars state labor con­tracts and bind­ing arbi­tra­tion awards from tak­ing effect with­out a vote by the leg­is­la­ture. Under cur­rent law, con­trac­tors and arbi­tra­tion awards can take effect with­out an affir­ma­tive vote by lawmakers.

The labor changes sought by Repub­li­cans were a sen­si­tive issue for Ares­i­mow­icz, whose employ­ment out­side the part-time leg­is­la­ture is a $100,000-a-year job with one of the state’s largest pub­lic-sec­tor unions, Coun­cil 4 of AFSCME. Ares­i­mow­icz, who was employed by the union before his elec­tion to the leg­is­la­ture, said he left nego­ti­a­tions about labor changes to House Major­i­ty Leader Matt Rit­ter, D‑Hartford.

Many ques­tions remain about the details of the bipar­ti­san deal and its poten­tial con­se­quence, includ­ing whether it will change the polit­i­cal cul­ture of a Gen­er­al Assem­bly, where bud­gets long have been intense­ly par­ti­san, or the dynam­ics of the 2018 elections.

The Repub­li­can play­book for win­ning con­trol of the Gen­er­al Assem­bly next year for the first time since 1984 was expect­ed to revolve around a strat­e­gy of blam­ing Democ­rats, who also regained the gov­er­nor’s office in 2010 for the first time in two decades, for the state’s chron­ic fis­cal woes.

In a blue state, Repub­li­cans have achieved near-par­i­ty in the leg­is­la­ture, rebound­ing from a low point in 2008, when Democ­rats won majori­ties of 114–37 in the House and 24–12 in the Sen­ate. Democ­rats now have a nar­row major­i­ty of 79–72 in the House and are tied, 18–18, in the Sen­ate, where their only advan­tage is the abil­i­ty of Lt. Gov. Nan­cy Wyman to break ties.

The new polit­i­cal order was made evi­dent last month, when three Democ­rats in the Sen­ate and five in the House helped the GOP defeat a Demo­c­ra­t­ic bud­get and pass a Repub­li­can alter­na­tive that was vetoed by Mal­loy. Over the past three weeks, leg­isla­tive lead­ers have been nego­ti­at­ing with­out Malloy.

Ares­i­mow­icz down­played the gov­er­nor’s absence from the talks.

The gov­er­nor was always present at the nego­ti­a­tions, whether he was there phys­i­cal­ly or not,” Ares­i­mow­icz said. “We know where the gov­er­nor stood. There’s one thing about this gov­er­nor that is both reas­sur­ing and mad­den­ing at the same time: He’s amaz­ing­ly con­sis­tent. He lays out exact­ly what he feels about an issue and then he does­n’t budge from it all that easy.”

The gov­er­nor offered praise Tues­day night for one appar­ent con­ces­sion by law­mak­ers: They will mit­i­gate the extent to which they will divert mon­ey from the Green Bank and anoth­er ener­gy con­ser­va­tion pro­gram sup­port­ed in large part by sur­charges on con­sumers’ month­ly util­i­ty bills.

The Green Bank diver­sion sparked con­sid­er­able debate this week after clean ener­gy advo­cates — includ­ing the gov­er­nor — not­ed that each dol­lar of state fund­ing in this pro­gram lever­ages $8 to $10 of pri­vate investments.

Leg­isla­tive lead­ers did not dis­close final num­bers. But sources said lead­ers were look­ing to retain but reduce the diver­sion from the Green Bank and increase the dol­lars drawn from the Ener­gy Effi­cien­cy Fund.

Tonight’s com­ments from leg­isla­tive lead­ers that the debil­i­tat­ing sweeps of these funds are under recon­sid­er­a­tion is wel­come news,” Mal­loy said. “While we await details of the final num­bers, we strong­ly hope that much of the dam­age these cuts would have caused will be avoided.”

Leg­is­la­tors will rely on a mix of tax hikes, fund sweeps and oth­er rev­enue enhance­ments, and a broad range of spend­ing cuts to close major pro­ject­ed deficits.

Ana­lysts say finances, unless adjust­ed, will run $1.6 bil­lion in deficit this fis­cal year and $1.9 bil­lion in the red in 2018–19.

Cig­a­rette tax­es rise, income tax cred­its shrink

The sin­gle-biggest tax hike in the plan would raise the annu­al tax on hos­pi­tals by $334 mil­lion, from $556 mil­lion to $900 mil­lion. But the state would not ben­e­fit by that much.

That’s because Con­necti­cut would return all of those funds to the hos­pi­tal indus­try, and then some, to qual­i­fy for addi­tion­al fed­er­al Med­ic­aid reim­burse­ment. The net pro­ject­ed rev­enue gain to the state is esti­mat­ed at $137 mil­lion per year.

Leg­is­la­tors also would raise income tax­es on mid­dle-income house­holds and on the work­ing poor — not by rais­ing rates, but by reduc­ing credits.

The new bud­get also would raise the cig­a­rette tax by 45 cents per pack, push­ing the levy to $4.35. This would place Con­necti­cut in a tie with New York for the nation’s high­est cig­a­rette tax.

Teach­ers to con­tribute more for pensions

The new bud­get will not include Mal­loy’s pro­pos­al to shift a por­tion of the cost of teacher pen­sion onto cities and towns, which cur­rent­ly con­tribute noth­ing. Instead, con­tri­bu­tions from teach­ers will increase from 6 per­cent to 7 per­cent of their salaries.

But the pro­vi­sion is a bud­get maneu­ver that ulti­mate­ly brings more mon­ey to the gen­er­al fund, not the teacher pen­sion sys­tem: As the teach­ers increase their con­tri­bu­tions to their pen­sion fund, the state will reduce what it pays — a boost to the gen­er­al fund.

Retired teach­ers, who receive a 25 per­cent exemp­tion for their pen­sions from the state income tax, will not see that tax break climb to 50 per­cent with the returns they file next spring, as orig­i­nal­ly enact­ed three years ago.

A pro­pos­al to repeal munic­i­pal prop­er­ty tax­es on motor vehi­cles start­ing in July 2018 was stripped from the plan after city and town lead­ers object­ed to the loss of $800 mil­lion in rev­enue with no state plan to com­pen­sate for the loss. But leg­isla­tive lead­ers said the state cap on motor vehi­cle tax­es would rise from 37 mills to 39 this fis­cal year, and to 45 mills in 2018–19.

Ares­i­mow­icz said law­mak­ers intend to revis­it the prop­er­ty tax issue dur­ing the 2018 leg­isla­tive ses­sion and will explore alter­na­tives that could make the 45-mill cap unnecessary.

Edu­ca­tion Cost Shar­ing grants to most cities and towns — the state’s pri­ma­ry vehi­cle for pro­vid­ing local edu­ca­tion aid — would be cut by 5 per­cent or less, sources said. And pay­ment to the low­est-per­form­ing school dis­tricts large­ly would remain flat. Mal­loy want­ed a shift to the com­mu­ni­ties of great­est need.

Rep. Daniel Rovero of Killing­ly, a mod­er­ate Demo­c­rat who sup­port­ed the Repub­li­can bud­get in mid-Sep­tem­ber said he prob­a­bly would back the com­pro­mise plan.

I want to read it, but it did­n’t cut any­body real­ly dras­ti­cal­ly” in terms of local aid, he said. “And there’s no real big tax increases.

Ares­i­mow­icz and Fasano both said the new bud­get also address­es anoth­er major con­cern of the gov­er­nor’s: A man­date from the leg­is­la­ture for the admin­is­tra­tion to find cuts it could not.

The gov­er­nor said he already would be chal­lenged to hit the sav­ings tar­gets he pro­posed — $838 mil­lion this fis­cal year and just over $1 bil­lion in 2018–19. Mal­loy balked when the Repub­li­can plan he vetoed tried to add $260 mil­lion to those tar­gets over two fis­cal years combined.

But lead­ers said the new deal adds less than $20 mil­lion to the gov­er­nor’s tar­get each fis­cal year.

Leg­is­la­tors took this con­cern of Mal­loy’s seri­ous­ly, Rit­ter said. As late as Mon­day, some leg­is­la­tors sug­gest­ed clos­ing a lin­ger­ing gap of $30 mil­lion in annu­al finances by adding that onto the gov­er­nor’s sav­ings tar­get as well.

Instead “we sat there for 90 min­utes” to find oth­er spend­ing cuts to avoid hand­ing that chal­lenge off to the gov­er­nor, Rit­ter said.

Kei­th M. Pha­neuf and Mark Pazniokas are reporters for The Con­necti­cut Mir­ror (www.ctmirror.org). Copy­right 2017 © The Con­necti­cut Mirror.

 

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