Christine Stuart photo

Following Monday’s letter warning lawmakers not to think about proposing tax hikes to fix the looming budget deficit, Gov. M. Jodi Rell met with members of her economic advisory board, who told her the state is facing economic headwinds which are likely to extend through 2009.

Rell emerged from the hour-long meeting Tuesday to tell the media she would be looking to make additional budget cuts. Rell has already made about $140 million in budget rescissions and as governor, she has the authority to cut state agency budgets up to 5 percent without legislative approval.

Rell said the state is on track for a possible $145 million budget deficit in 2009 after ending fiscal year 2008 with an estimated $85 million surplus.

However, the alarmist nature of Monday’s letter followed by Tuesday’s press conference had some Democrats perplexed.

Rep. Denise Merrill, D-Mansfield, co-chairwoman of the Appropriations Committee, said the governor and the legislature have known since June that the state would be running at least a $150 million budget deficit in 2009. And, she added that none of the Democrats have proposed increasing taxes.

Christine Stuart file photo

“There’s no news here,” Merrill said in a phone interview Tuesday afternoon.

She said she doesn’t understand why the governor is panicking. She said the state was facing a $50 million budget deficit at the beginning of fiscal year 2008, which then turned into an $85 million surplus.

Merrill said she’s concerned because she sees the governor posturing to make mid-year budget cuts which can cause a lot of chaos to state programs and services.

“I just don’t see the thunderclouds,” Merrill said. “I think we’re in pretty good shape.”

Senate Minority Leader John McKinney, R-Southport, said Tuesday that all Democrats have done since the end of the legislative session is talk about increasing spending from increases in home heating assistance for low-income residents to increases in benefits for low-income seniors on the state’s prescription drug plan. He said there’s no way for the state to support those proposals without a plan to increase taxes.

He said Democrats aren’t going to admit to any plan to increase taxes until after the November elections. Merrill said that’s a false statement. She said she hasn’t heard about any plans to increase taxes.

Merrill said last week three legislative committees voted in favor of a plan to amend the individual benefit 80,000 low-income residents receive through the federal Low Income Heating Assistance Program, LIHEAP. She said by increasing the benefit from $625 to $875, the committee was being realistic considering today’s average cost for a gallon of home heating oil. She said Rell’s administration preferred these individuals continue to come back for supplemental help and the legislative committee’s wanted to give them the full benefit up front.

By increasing the benefit the committees increased spending about $30 million, McKinney said. In Monday’s press release Rell said “lawmakers blithely increased spending by about $30 million more – without any source of funding.”

Merrill doesn’t disagree with this number, but believes the state will see an increase in federal dollars to compensate for the increase in state spending making it more of a formality than actual spending. She said the state could also some of the money in the $1.4 billion Rainy Day fund or an estimated surplus within the Department of Social Services.

Rell said Monday that she would not permit dipping into the Rainy Day fund and called the surplus within the Department of Social Services “a purely hypothetical lapse.”

Senate President Donald Williams, D-Brooklyn, said Tuesday afternoon that “in terms of the overall state budget, the reality is that Gov. Rell is looking under the couch cushions for savings while her administration has thrown tens of millions away on mismanaged projects, including the boondoggle in the New Haven rail yard and the storm drains to nowhere on I-84.”

“We encourage the Rell administration to eliminate waste and ensure that hard earned tax dollars are being invested wisely,” Williams said.