The budget Gov. Dannel P. Malloy unveiled Wednesday raises tax revenue by $914 million and cuts spending by $1.3 billion in an effort to close a $2.5 billion two-year budget deficit.
The two-year tax-and-spend plan is the first of Malloy’s second term as governor. When he addresses the legislature Wednesday he is expected to argue that the nearly $1 billion in revenue increases in the budget do not violate his campaign pledge to not raise taxes.
The budget’s revenue hikes include a delay in restoring the Earned Income Tax Credit for poor families. Currently, the state pays 27.5 percent of the federal EITC to Connecticut residents. It was supposed to go back up to 30 percent in 2016, but that would cost the state about $13 million.
The administration has also called for eliminating a scheduled tax exemption on clothing, reducing the benefits of the annual tax free week, maintaining a 25 percent corporate tax surcharge, and preserving restrictions on film tax benefits. The budget also assumes new restrictions on losses a corporation can carry forward.
On the spending cut side, Malloy revived a previous proposal that would drop 34,000 parents from Husky A insurance and force them to purchase insurance on the exchange. It’s estimated to save the state more than $44.6 million in the first year and $82.1 million in the second year. A similar proposal was killed in 2013 by Democratic lawmakers.
Malloy also plans on saving $23 million from closing a state prison. He’s leaving the decision about which prison to close up to Correction Commissioner Scott Semple.
Benjamin Barnes, the governor’s budget secretary, told reporters Wednesday that the prison closure is not dependent on the “Second Chance Society” proposal Malloy made earlier this month. As part of that initiative, the governor wants to eliminate mandatory minimum prison sentences that accompany some nonviolent drug possession crimes and make those crimes misdemeanors rather than felonies. His proposals also would speed up parole hearings for low-risk inmates and ease the process by which ex-offenders earn a full pardon.
Malloy’s budget calls for no givebacks from the state workforce, but it does assume savings from an “aggressive hiring lapse” as the administration intends to hold between 300 and 400 positions vacant for one year.
Generally, the budget holds state aid to towns steady, but increases the share a municipality must pay for a resident state trooper from 70 percent to 100 percent.
Barnes acknowledged the budget assumes significant tax revenues in April, which creates “uncertainty” in the budget. He reminded reporters during a Wednesday budget briefing that similar estimates in the state’s previous budget never materialized.
Overall, state spending would grow by more than 3 percent under Malloy’s budget.
The five-year, $10 billion transportation program, will be funded with borrowing. Malloy is not proposing tolls and Barnes said he hasn’t seen a toll proposal that would be able to fund that amount of spending.
The $10 billion program includes $3.8 billion in state funding already authorized by the legislature, $2.8 billion in new state funding and $3.4 billion in federal funding. The projects in the first five years include moving forward with replacing Hartford’s viaduct, widening Interstate 95, fixing the Charter Oak Bridge, building rail stations and improving bus service.
But Malloy’s vision to improve Connecticut’s transportation infrastructure will span 30 years. In his budget address Malloy told lawmakers he plans on convening a commission to recommend a “sustainable structure to fund transportation over the next 30 years and beyond.”
Christine Stuart contributed to this report.