In a Wednesday morning briefing with the media and lobbyists Gov. Dannel P. Malloy’s Budget Director Ben Barnes hit the highlights and lowlights of the state budget, which increases overall spending 2.4 percent in each fiscal year. But there was little offered that hasn’t already been offered in previous briefings.
“Overall this budget contains more spending cuts than tax increases,” Barnes said. That notion was disputed Tuesday by Republican legislative leaders, who felt it increased taxes more than cut spending.
With respect to the income tax increases almost 38 percent will come from those making more than $250,000 and those who earn between $50,000 and $100,000 account for 23 percent of the tax burden. Those with incomes between $100,000 and $250,000 account for 26 percent of the tax burden, Barnes said.
Then there is the elimination of the sales tax exemptions on everything from clothing under $50 to car washes. Malloy had maintained on the campaign trail he would look to eliminate some of the close to $5 billion in tax exemptions that found their way into the budget over the years.
“How competitive are our taxes now and how competitive will they be under the proposal?” Barnes said. “We believe that with a 6.7 percent tax rate on high income earners we remain competitive.”
As for as the increase in sales taxes to 6.25 percent, Barnes said it keeps Connecticut competitive with Massachusetts which also has a 6.25 percent sales tax. However, Malloy will also propose a 6.35 percent sales tax rate on all retail items. The one-tenth of a percent will be returned to municipalities where the sale is made.
And as Medicaid caseloads increase, so do the costs, Barnes said.
“It creates enormous fiscal challenges for us,” he said. Part of addressing those will be expanding the existing provider tax and user fee in addition to creating two new provider taxes, including one on hospitals. Last year the Connecticut Hospital Association was successful in defeating a similar proposal.
For weeks, Malloy has been touting his decision to hold towns harmless for 14 percent reduction in federal funds, and Barnes said Wednesday that over the next few weeks the administration will be proposing a new state funding formula for education funding.
“We have been unable to put it together in five weeks,” Barnes said. But the state has been unable to figure out how to change it for years.
Malloy also wants to change the budget process, including transitioning to General Accepted Accounting Principles and increasing the target for the state’s Rainy Day fund.
It also doesn’t want to be the only entity approving a collective bargaining contract.
Barnes said Malloy will propose giving the General Assembly the ability to vote to approve a collective bargaining agreement.
It also seeks to increase the governor’s rescission authority from 5 percent of any appropriation to 10 percent of any appropriation, a move the Democrat-controlled legislature rejected when former Gov. M. Jodi Rell was in office.
In a move that wasn’t unexpected, Barnes was unable to talk about how Malloy will seek the $2 billion in state employee union concessions and savings. Malloy will address this in his speech at noon.
It’s also unclear if the Correction Officers and Supervisors unions will experience layoffs since they didn’t agree to the 2009 contract with Rell. Barnes said the decline in the prison population and other changes will result in about $7 to $8 million.
-81 percent of the $1.5 billion in tax increases will be by individuals, 19 percent by businesses.
-$1 billion in concessions and savings from the state employee unions in each of the two years of the budget.
-$758 million in spending reductions “will entail sacrifice by all who use state services.”
-It’s $406.4 million in the first year and $57.4 million in the second year below the spending cap.
-$10 million in savings from state agency consolidations.
-$41 million in the first year and $86 million in the second year will be saved by saying good-bye to the HMO’s that currently run the state’s HUSKY and Charter Oak programs.
-$83.3 million in cuts to uncompensated care paid to hospitals, which will be offset by federal reimbursements.
-$15 million in marketing Connecticut tourism in each year of the budget
-Reduce reimbursement level of pharmacy programs by $159 million.
-Smoking cessation will be covered for Medicaid patients, which will save $3.75 million in year one, and $7.5 million in the second year.
-Closure of five state run group homes and consolidate the Southbury Training School
-Reduce dental, vision, and x-rays for Medicaid recipients to once per year to save $20.1 million
-Elimination of Payment in Lieu of Taxes (PILOT) for manufacturing and machinery. The exemption will remain, but the state’s reimbursement to municipalities will end.
-Modify legislative process for approval of state employee contracts