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Tuesday, June 27, 2017

House, Senate Democrats Unable to Agree on Provisional Budget

By Keith M. Phaneuf

www.ctmirror.org

Connecticut’s prospects of enacting a state budget — even a provisional one — before the new fiscal year begins July 1 appeared to slip away late Monday night as House and Senate Democrats were unable to agree on a path forward.

After closed-door talks between House and Senate Democrats bogged down over several issues, including a potential sales tax hike and labor concessions, House Speaker Joe Aresimowicz of Berlin, notified his fellow Democrats they should not expect to vote on a provisional budget Thursday.

The speaker had asked Democrats, who hold a slim 79-72 edge in the House, to hold open Thursday for a possible budget vote.

Aresimowicz refused to discuss details of the negotiations, but he confirmed today that he doesn’t anticipate a budget vote at this time.

““Short of both chambers and both political parties willingness to sit down and seriously negotiate a compromise budget for the state, convening a House session Thursday will do nothing to move us forward,” Aresimowicz said today.

“This is the reality of a Senate where responsibility is shared equally between the parties combined with a tight House margin. Without everyone participating in good faith, and leaving behind the political blame game, it appears the governor will be running the state by executive order for the foreseeable future.”

Aresimowicz said he still has asked House Democrats to come to the Capitol on Thursday to discuss budget issues in caucus.

Analysts say state finances, unless adjusted, would run $2.3 billion in deficit in the fiscal year that begins Saturday, and $2.8 billion in the red in 2018-18.

Democratic and Republican legislators and Gov. Dannel P. Malloy have been at loggerheads over how to close that potential gap, though all sides say they want to minimize tax hikes, given the the state authorized major increases in 2011 and 2015.

Talks between Democratic and Republican legislators effectively have broken down over two issues:

The GOP only is willing to consider minimal tax hikes to close the projected shortfall, and also opposes the concessions deal proposed by Malloy and state employee union leaders.

That deal is projected to save $1.57 billion over the next two fiscal years — and $24.1 billion over the next two decades. It calls for three years of wage freezes, plus increased employee contributions toward health and retirement benefits.

But it also would extend the state’s benefits program from mid-2022 until mid-2027.

That extension is a source of disagreement because — even if the proposed changes are made — Connecticut still would require future generations of taxpayers to cover a significant portion of the costs of retirement benefits promised to present-day workers.

The agreement also would prohibit the state from laying off most workers for the next four fiscal years.

Democrats have nominal control of the General Assembly.

The Senate is evenly split, with Lt. Gov. Nancy Wyman, a Democrat, able to cast tie-breaking votes. Given that and the narrow margin in the House, Democrats could craft a budget on their own, but all lawmakers and the governor would have to be prepared to reach compromise on many sticky issues.

And according to sources close to Monday’s negotiations, some moderate Democrats remain wary of proposals to boost the sales tax rate from 6.35 percent to either 6.75 percent or 6.99 percent.

A rate increase and a possible elimination of some sales tax exemptions would be used to mitigate municipal aid reductions that have been proposed to help close the big projected deficits in the next two fiscal years.

Sources also said some Democrats share the GOP’s concerns about the proposed concessions deal.

Malloy asked legislators Monday to consider approving nearly $320 million in revenue increases to mitigate the massive cuts he would be forced to impose if Connecticut enters the new fiscal year Saturday without a budget.

Even if those steps are taken, Malloy outlined deep cuts to municipal aid, social services, hospitals, and public colleges and universities that would occur if he had to run the upcoming fiscal year by executive order.

“Connecticut can and will adopt a responsible, balanced budget for the coming biennium –- the question is how best to handle our finances until that happens,” the governor said Monday.

“I am prepared to operate government in the absence of a budget, but it has never been my preference to do so.”

Drawing from proposals in separate budget plans offered by Democratic and Republican legislative leaders, as well as from his own, the governor proposed $317.5 million in new revenue be authorized now — even though a full budget plan for the fiscal year starting July 1 still is being negotiated.

The governor said those revenues would be used chiefly to mitigate cuts he would be forced to make to social services and to municipal aid.

Malloy’s recommendations include:

$68.3 million in additional income tax revenues raised by restricting a property tax credit to households with dependents and by freezing a tax credit for working-poor families.

$60 million to be raised by a tax amnesty program covering income, sales, corporation and other taxes.

$26.4 million from capping various business tax credits.

$5.0 million from increasing various license and permit fees and fines.

And $137.3 million in one-time funds to be swept from various off-budget accounts.

Republican leaders made it clear Monday they would not vote for any provisional revenue plan.

“We feel very strongly that what this state needs is a budget,” Senate Republican leader Len Fasano of North Haven said.

“Perhaps doing mini-budgets just prolongs the inevitable, which is just coming back here and talking and trying to get it worked out.”

House Minority Leader Themis Klarides, R-Derby, said the budget-by-executive-order option and the alternative — the same plan modified by modest revenue increases aren’t that much different.

“Instead of complete tornadoes and hurricanes and cyclones going through the state of Connecticut, it’ll just be tornadoes and hurricanes. Right?” she said.

“So it’s a better version of a bad-case scenario. I appreciate him making that effort.”

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Posted 06/27/17 at 11:15 AM  Permalink



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