Depending upon which lawmaker you speak to, Gov. Dannel P. Malloy’s two-year budget is either visionary or disingenuous.
The two-year $43.8 billion budget increases spending 9.7 percent and makes radical changes to municipal funding. The budget stays within the state’s spending cap, but only if lawmakers approve changes to the cap Malloy has proposed, exempting certain types of spending.
In his speech to a joint session of the General Assembly, Malloy recounted the fiscal problems he encountered when he took office two years ago.
“Problems that included a worst-in-the-nation per capita deficit; a budget that relied too heavily on gimmicks and one-time revenues; financial commitments that, if we had failed to act, would fall on the shoulders of our children,” Malloy said. “All problems for which we knew there were no simple answers. It no longer matters who caused those problems. What matters is that – together – we started to fix them.”
Democratic lawmakers like House Speaker Brendan Sharkey and Sen. Majority Leader Martin Looney were complimentary of Malloy’s budget and vision for the state, but Republican lawmakers were baffled at what they saw as hypocrisy.
House Minority Leader Lawrence Cafero said he was struck by how much Malloy’s words differed from the actual budget proposal upon which they were briefed earlier in the day by Office of Policy and Management Secretary Ben Barnes.
Cafero said Malloy claimed to have cut spending by $1.8 billion when he proposes to increase spending over a two-year period by 9.7 percent. He also disagreed with the governor’s assertion that he had held towns and cities harmless in his budget.
“To say that he’s flat-funding municipalities and in the same breath take away one of their largest income streams which is municipal car tax and not supplant with anything — that’s $500 million and he’s taking it away and not substituting for it,” he said.
Cafero said Malloy also was claiming to maintain education funding but was taking away other municipal funding to do it. He said the governor’s plan to decrease the state’s deficit under Generally Accepted Accounting Principles by borrowing money to pay it was “somewhat disingenuous.”
He said Malloy was borrowing an additional $3.1 billion over two years. He said that borrowing would need to be paid for somehow. Cafero also took issue with the governor’s plan to extend some taxes, which were scheduled to sunset.
“That’s a new tax. People were not planning on paying that tax,” he said. “So you didn’t cut spending, you increased it. You keep municipalities whole, you took away from them. Yes, you increased education, but you just took it from one pocket and put it in the other, and the city side of every municipal budget is going to hurt.”
Senate Minority Leader John McKinney said the governor was playing “nothing more than a shell game” if he’s putting more money into education, but towns are getting the same amount of net money from the state.
“If it’s not a shell game than some towns are going to get more and other communities are going to get less and it would be intellectually dishonest if some communities get less money to stand to say ‘I’ve kept all our towns and cities whole,’” he said.
But Barnes disagreed with their assessment.
“This budget is brutally honest. I don’t think we’ve hidden anything about it,” he said, adding that he’s briefed various groups, including Republicans and the media, on the budget. “We have nothing to hide. The notion that this is disingenuous is—I reject that.”
Municipal leaders were still crunching the numbers, but they were concerned that so much of the money they currently receive could only be used on capital projects.
At a 2 p.m. press conference, Danbury Mayor Mark Boughton, a Republican, said he doesn’t believe Malloy’s budget offers middle class tax relief. Instead, it shifts the burden of raising revenue down to municipalities. It also pits local chief executives against their school boards.
“There’s a lot of things that put more pressure on local government at a time when we can least afford it,” Boughton said.
“I do applaud the governor’s concern and passion for education, but moving money from PILOT over to ECS and saying ‘I increased your grant’ is almost insulting,” Boughton said.
Malloy’s budget eliminates the PILOT program and redistributes the funding through the Education Cost Sharing grant. It also changes the Mohegan-Pequot grant into a capital program, instead of a municipal funding program, which means towns won’t be able to use that money for operating expenses.
“You absolutely haven’t increased our grant, you’ve just moved the football and made it a lot harder to be able to go out there and deliver the services we need to deliver,” Boughton said. “I can’t tell policemen and firemen that I have to lay them off because the governor decided to move money into different pots.”
He said the governor’s proposal wasn’t the reset he expected to see.
Part of the radical changes to the municipal funding include eliminating the motor vehicle tax on vehicles assessed at $20,000 or less.
Sharkey said he thinks the governor is following through on his commitment to present a budget with “no new taxes” and is doing so in a transparent way. Looney also commended the governor for presenting a budget that covers the deficit. But both were skeptical of the elimination of the car tax.
It might be the most regressive and unpopular tax in the state, but Sharkey said he’s not able to say with any certainty that eliminating it means property taxes will go down. It’s likely the opposite will happen.
“I think the governor deserves a lot of credit for putting it on the table today and we’ll work out those details as we go,” Sharkey said
He speculated that they may look at phasing in a removal of the tax.
But Looney said the way Malloy is proposing eliminating the motor vehicle tax is progressive because those who own less expensive cars will see a benefit since the exemption from the tax is for the first $20,000 in assessed value of the motor vehicle.
“It’s been a festering issue for some time,” Looney said. “There has been dissatisfaction with the current car tax for some time.”
In the past, governors have proposed creating a statewide motor vehicle tax rate and then redistributing the money to the municipalities. Malloy is not proposing to replace the revenue stream.
It’s unclear if there’s enough support to completely eliminate it without replacing the revenue stream to municipalities.
As for Malloy’s decision to extend the electric generation tax and corporate surcharge, Sharkey said it may need to wait.
“When we make promises, if we have to hold off on following through, then we do that very sparingly,” Sharkey said “These are difficult times. It had to be part of the mix unfortunately at this point.”