The legislature approved an $18.9 billion state budget plan this weekend that preserves municipal aid and preschool funding. The budget repeals keno but gambles on future revenue collection and unidentified savings.
Legislators in the House debated and passed the plan on a 91-55, mostly party line vote with Democratic Reps. Edward Moukawsher, Frank Nicastro, and Daniel Rovero joining Republicans in opposing it. A few hours later the Senate voted 21-15 to give the bill final passage early Sunday morning. Democratic Sen. Joan Hartley voted with Republicans against it.
Legislative Democrats and Gov. Dannel P. Malloy’s administration negotiated the budget this week after budget analysts concluded the $505 million surplus anticipated earlier had dropped to about $43.3 million based on disappointing income tax revenue.
“Let’s face it, we’re all humbled at the fact that budget projections really rely on the best guess of economists and fiscal analysts and those estimates can fluctuate so many states across the country have had to revise numbers,” Senate President Donald Williams said.
The new plan assumes that the Department of Revenue Services will, in 2015, collect an additional $75 million in unpaid taxes from tax delinquents identified last year during the tax amnesty process.
The budget increases spending 2.5 percent and it assumes the administration won’t spend $132 million that it had planned to spend when it approved the two-year budget last year. If spending patterns in the 2015 budget are maintained, the state will face a $1.3 billion deficit in 2016.
The budget assumes no revenue from keno and repeals the state’s authorization to implement the bingo-style game. Although keno was legalized last year, it was never rolled out and is generally unpopular among voters.
“This budget speaks to Connecticut’s priorities. Municipal aid, education, transportation, jobs, the environment, criminal justice, healthcare, and above all it provides the help to the people that need it in Connecticut,” Rep. Toni Walker, a New Haven Democrat who chairs the Appropriations Committee, said.
The budget will again spare municipalities from most cuts. It increases the Education Cost Sharing formula’s payment to municipalities by about $47.5 million and boosts payment-in-lieu-of-taxes, or PILOT, for state property by $10 million and an additional $10 million for colleges and hospitals. It also seeks to distribute $12.7 million in the Municipal Revenue Sharing Account that was mistakenly caught in limbo after last year’s budget.
The budget further preserves spending for private, nonprofit providers who serve the developmentally disabled and the addicted. It transfers $11.5 million from the Tobacco Settlement Fund to substance abuse and mental health services.
“We were looking for a way that we could keep mental health providers, people who treat people with addiction in business because that system’s so fragile,” Sen. Beth Bye, co-chairwoman of the Appropriations Committee, said. “We believed it was a very appropriate use of the Tobacco Settlement Fund.”
The budget also includes an additional $4 million to open residential slots for 100 intellectually and developmentally disabled adults who have been on a waiting list because their parents are elderly. It was one of the additions the Appropriations Committee made to Malloy’s budget.
The budget scales back the tax relief Malloy planned to offer retired teachers by phasing it in over a period of three years. Under the budget adopted Saturday, 10 percent of the retirement income would be exempt. That exemption increases to 25 percent in 2016 and 50 percent in 2017.
“This budget is on time, balanced without any new taxes, and under the state spending cap. It invests in our children’s education, helps working families, encourages economic growth, and bolsters the Rainy Day Fund to protect taxpayers from future budget fluctuations,” House Speaker Brendan Sharkey said in a statement.
Republicans, however, claimed the budget is built on faulty premises. House Minority Leader Lawrence Cafero compared the budget to superficial repairs to a house in order to get its sellers through closing day. He said lawmakers were using “Band Aids and duct tape” and a fresh coat of paint to prop the budget up through the next Election Day rather than address its fundamental problems.
“We have water in our basement and our roof is leaking. If we’re honest people, and I believe we are, we have to tell that to the people of the state of Connecticut and we have to fix the roof,” he said. “The budget that’s before us now is a house built on a faulty foundation and unless and until we change that foundation, that house will crumble.”
Republicans questioned the reliance upon $75 million from previously uncollected taxes. Rep. Vincent Candelora, R-North Branford, called it a “wish fund,” for which the tax department has been given no new resources to collect.
Finance Committee Chairwoman Rep. Patricia Widlitz said the Commissioner of Revenue Services has the ability without legislation to reach out to taxpayers who have fallen behind on their taxes and negotiate a way to help them “meet their commitments.” She said that “most people want to pay their taxes.”
“Not these people,” Rep. Sean Williams, the Finance Committee’s ranking Republican, said.
The nonpartisan Office of Fiscal Analysis told Cafero in a letter Saturday that it has “not been able to obtain other information to support the $75 million in enhanced collection initiatives.”
“The very people who have not in the past paid their taxes and who did not pay their taxes vis-a-vis a tax amnesty program, a very aggressive tax amnesty program,” Williams said. “. . . All of a sudden we are expected to believe this revenue is going to come right in and our whole world’s problems are going to be solved right here in Connecticut.”
He said it’s decisions like this that cause the state to continue to run into deficits.
Already, the current fiscal year budget fell $462 million short of the $505 million surplus budget analysts predicted in January. That’s in addition to the loss of keno revenue.
In addition to the $75 million in miscellaneous tax revenue, the budget assumes that a number of Correction Officers eligible for retirement won’t be retiring, which means the state won’t have to find $51 million to fund their retiree health benefits.
State Comptroller Kevin Lembo told the governor’s office and nonpartisan budget analysts that he believed it was prudent to add that money to the budget. The Appropriations Committee did added it to their budget, but after revenue estimates came in lower than expected, Bye said “the committee has a level of comfort that the Office of Policy and Management will be able to meet their obligations to retiree health care.”
State budget director Ben Barnes said he doesn’t believe the Correction Officers will retire despite their eligibility because most are fairly young.
