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Tuesday, April 25, 2017

CT Budget Process Collapses Amid Dissension

By Keith M. Phaneuf and Jacqueline Rabe Thomas

www.ctmirror.org

UPDATE The General Assembly’s Appropriations Committee today failed to adopt a $41 billion budget proposal as Democrats were unable to hold together a paper-thin majority on the panel.

And as leaders from both parties blamed each other for the committee’s failure to act — two days before its Thursday deadline — everyone also acknowledged there was a chance the tax-writing Finance, Revenue and Bonding Committee might not finish its work before its allotted time runs out on Friday.

Sen. Cathy Osten of Sprague and Rep. Toni E. Walker of New Haven, the Democratic chairs on the appropriations panel, announced at about 3 p.m. that a vote would not be held.

“It was made clear that many of the people who were participating” in preparing the plan “were still voting no,” Walker said, referring to Republican members of the Appropriations Committee.

Both Senate and House Democratic leaders said they had the votes to pass what they called a “compromise budget” – but it would not have been fair to ask their members to vote on a package that they had to give so much on without any Republican votes.

“I can tell you that Senate Democrats were ready to vote on this budget,” said Osten of the stalled plan. “We were not able to reach consensus amongst the House members.”

Democrats said it appears now that Republicans on the budget panel never planned to support any of the tough choices needed to balance the next state budget.

“It is a problem when you do negotiations and only one person has to carry all the weight,” said Walker. “I am very disappointed.”

“Let’s not forget, the Republicans haven’t voted for a budget in 10 years,” Senate Majority Leader Bob Duff, D-Norwalk, said. “…So I’m not sure if they just got nervous and decided to walk away.”

The GOP made big gains at the polls last November, which left the Democrats — long in the majority in the legislature over the past two decades — with little margin for error in the difficult task of crafting a state budget.

The Appropriations Committee has six Democrats and six Republicans among its 12 senators, while Democratic representatives outnumber Republican House members by just two, 21-19. House Speaker Joe Aresimowicz said the plan they put forward earlier in the day, had about 85 percent agreement with Republicans.

That means if just one Democrat is prepared to vote against the plan — and if Republicans are united in opposition — it could fail in a deadlocked vote. And after hours of talks in a closed-door caucus today, Democrats weren’t unanimous in support of the budget plan presented by leaders.

GOP will release its budget by the end of the week

“It was obvious they didn’t have the Democratic votes to push that budget through, for one reason or the other,” said Senate Republican leader Len Fasano of North Haven.

Fasano said Republicans, who hold half the seats in the Senate and nearly match Democrats in the House, will produce their own budget by week’s end. It will require no new taxes, he said.

House Minority Leader Themis Klarides, R-Derby, said Democrats didn’t work as hard as they should have to gain Republican votes. Because the GOP has fewer House members on the committee than Democrats do, the Republicans’ ranking representative, Melissa Ziobron of East Haddam, wasn’t allowed in final negotiations with Democratic chairs.

“Don’t sit there and tell me … that everybody’s ideas are important and they (can) all come to the table, yet my ranking member in appropriations wasn’t involved in some of these meetings,” Klarides said. “You either want all of the leaders at the table or you don’t. … That is a disrespectful issue at its core.”

It also was unclear late today what the gridlock in appropriations meant for the finance committee.

Senate President Pro Tem Martin M. Looney, D-New Haven, disclosed that Democrats — who also hold the slimmest of majorities on that panel — have decided not to recommend any major income or sales tax hikes, even though the finance committee held a hearing today on these and other revenue-raising proposals.

Looney, Klarides and Fasano also expressed uncertainty about whether the finance committee would adopt any revenue recommendations before its deadline at the close of business Friday.

Gov. Dannel P. Malloy expressed disappointment that the committee failed to recommend a spending plan today, but the Democratic governor pledged to continue working with both parties to close major projected deficits in the upcoming fiscal years.

“I am profoundly disappointed that neither Democrats nor Republicans could produce a budget that makes responsible progress toward addressing our fiscal challenges,” the governor wrote in a statement afterward. “I stand ready to work with leaders of both parties as they come to terms with the real and growing challenges facing Connecticut.”

And the fiscal stakes are particularly high this year.

State finances, unless adjusted, are on pace to run at least $1.7 billion in deficit next fiscal year, and $1.9 billion in the red in 2018-19, according to the Malloy administration.

And those numbers may be about to get worse.

An initial review of April income tax receipts found collections running $290 million below the level anticipated in the current budget for this month. A final analysis is due on April 30.

But if receipts fall short of budgeted levels this year, that usually prompts analysts to lower anticipated available revenues for each of the next two fiscal years by a similar amount.

Details of the stalled plan

Democrats hoped to win support with a plan that rejected Malloy’s controversial proposals to substantially redistribute local education aid and to shift a third of teacher pension costs onto municipalities.

The stalled budget plan would have boosted General Fund spending by 5.2 percent next fiscal year and by 1.8 percent in 2018-19, and also would have positioned the legislature to maintain the exemption for nonprofit hospitals’ real property from municipal taxation.

It relied on labor concessions worth $1.57 billion over the biennium — the same savings target Malloy built into his two-year budget proposal in February.

The plan would have spent $403 million more than Malloy proposed, topping his bottom line by $199 million in the first year and by $204 million the second.

The Appropriations Committee released copies of the plan early Tuesday in anticipation of a vote later in the day.

But there was skepticism among some lawmakers about whether the Appropriations and finance committees were developing spending and revenue plans, respectively, that balanced.

Malloy’s less costly plan relied on a $205 million net increase in taxes and fees in the first year and $166 million in the second. Neither of those totals included $408 million in revenue the state would collect in the first year — under the governor’s plan — and $421 million in the second, by billing cities and towns to cover one-third of the annual contribution to the municipal teachers’ pension fund.

How did the committee plans match up if the spending side surpassed the governor’s and the finance plan under development featured no major revenue increase? There is no requirement under the legislature’s rules that the proposals match up, but the stakes this year are particularly high.

Plan would have maintained ECS status quo

Funding for the state’s primary grant for education, the Education Cost Sharing (ECS) payment, would have remained flat over each of the next two fiscal years under the stalled Appropriations Committee budget.

Currently, two-thirds of the $2 billion spent on state school aid goes to the 30 lowest-performing districts. The governor proposed redistributing $231 million in existing aid to those impoverished districts through the ECS grant and special education grants, but the committee budget largely rejected that approach.

Instead, the committee plan would have redistributed about $20 million from towns that have been held harmless from ECS cuts as their student enrollment declined or town wealth rose.

This fiscal year, 56 towns are slated to receive $16 million more than the state-funding formula calculated they were entitled to. This hold-harmless practice has largely benefited non-impoverished districts.

The committee’s plan would have phased out these overpayments over the next five years and redistributed the money to all the remaining districts that are underfunded under the existing formula.

All towns underfunded, regardless of wealth, would see their grants increase by 0.3 percent next year and 0.6 percent the following year.

The committee plan also would have rejected the governor’s proposal to redirect special education funding to the most impoverished districts.

Instead, the panel would have kept the existing setup that has the state helping to pick up some special education costs when a disabled student’s costs far exceed the district’s per-student costs, regardless of town wealth.

Towns would have been spared teacher pension bills

Although the committee budget tried to shield cities and towns from having to assume a portion of teacher pension bills, municipalities still would have taken a hit.

The plan would have frozen a state sales tax revenue-sharing plan at $176.6 million per year. Arguably the Democratic legislators’ biggest initiative in 2015, the revenue-sharing plan was hailed as “historic and transformative” and a means to protect local property tax bases.

The communities’ share of the sales tax was supposed to be nearly $250 million this fiscal year and then rise above $330 million in 2017-18 and 2018-19.

Cities and towns already were frustrated last summer when they learned they would receive about $177 million in sales tax receipts this year rather than the promised $250 million.

The committee budget would have frozen the revenue-sharing program at $177 million for towns in each of the next two fiscal years as well.

Another $75 million in unallocated local aid — meaning officials hadn’t yet decided how it would be distributed — would have been eliminated in the first year of the committee budget, and another $85 million cut in the second year.

The committee also planned to keep a $56 million grant program that reimburses cities and towns for a portion of the local revenue they lose because private colleges and hospitals are exempt from property taxation. Malloy has recommended eliminating it

Hospitals would have been spared from local tax

Lawmakers were planning to scrap the governor’s proposal to end the property tax exemption for nonprofit hospitals’ real property. This would have been worth an estimated $213 million annually to cities and towns.

Malloy sought to offset the cost to hospitals with $250 million per year in supplemental state payments to hospitals, which, in turn, would enable Connecticut to qualify for more than $162 million in federal Medicaid reimbursement.

The Appropriations Committee plan also would have eliminated these supplemental payments, cutting the state’s annual share of that $250 million payment, or about $87.6 million.

The committee budget would have restored funding for several social service and health care priorities, including:

—Preserving eligibility guidelines for subsidized health care for poor adults;

—Boosting funding for community-based services for the developmentally disabled and mentally ill.

The stalled budget also included $1 million in extra funding over two years to help the Office of the Chief Medical Examiner preserve its accreditation.

The committee budget would have supported Malloy’s proposed 5 percent cut in aid for the University of Connecticut, the four regional Connecticut state universities and the 12 community colleges.

And it would have borrowed $35 million to fund a higher education financial aid program.

In recent years Malloy and the legislature have been criticized heavily for increasingly using borrowing to cover operating expenses.

Tourism would have benefited, but not transportation

In a controversial move, the stalled committee plan would have swept $77 million from the financially imperiled Special Transportation Fund’s reserves next fiscal year, and another $88 million in 2018-19.

But analysts say the fund could run $17.3 million in deficit this year and is facing larger shortfalls in coming years. And while the fund has a $142 million reserve, which could cover deficits for a few years, that cushion would be depleted by the Appropriations Committee plan.

The Appropriations Committee’s plan would have preserved the Council on Environmental Quality, an environmental watchdog group, and also raised funding for state parks through a new $10 surcharge on motor vehicle registrations that would raise about $11 million annually.

It also would have pumped significantly more dollars into tourism than the governor’s proposal.

The panel recommended $12 million next fiscal year and $15 million in 2018-19 for statewide tourism marketing, surpassing the $8.3 million annual total Malloy proposed.

The panel also would dedicate another $2.4 million annually for nine specific tourism regions, events and destinations.

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Posted 04/25/17 at 04:52 PM  Permalink



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