Christine Stuart photo
Ben Barnes (Christine Stuart photo)

HARTFORD, CT — (Updated 3 p.m.) Democratic Gov. Dannel P. Malloy proposed a budget Wednesday that makes spending cuts, increases taxes, assumes $1.56 billion in labor savings over two years, and makes sweeping changes to municipal aid.

The two-year, $41.51 billion budget closes a $3.6 billion deficit and relies heavily on labor savings while redefining municipal funding formulas.

The first year of the budget assumes $700 million in labor savings, which would require a 10 percent reduction in the state workforce. That’s equal to about 4,200 state employees, according to Office of Policy and Management Secretary Ben Barnes.

“While it is fair for us to ask for savings, it’s equally fair for our employees to also ask for changes as long as the end result is a more affordable and sustainable labor agreement,” Malloy said Wednesday during his budget address. 

House Speaker Joe Aresimowicz, D-Berlin, said whether it’s potential layoffs of state employees or private sector employees, “it always worries me.” He said they have an economic impact because they buy goods and pay taxes. He also worries that the state workforce has been reduced to the point where there are lines out the door at the Department of Motor Vehicles.

Barnes was unable to offer more detail than that the assumed labor savings in 2018 are budgeted at $700 million and $860 million in 2019.

“I’m encouraged by the progress of our discussions,” Barnes said Wednesday morning during a budget briefing with reporters.

AFL-CIO Connecticut President Lori Pelletier said they are extremely disappointed in the governor’s budget. She said it relies on cutting vital public services and asks nothing of the state’s corporations and extremely wealthy.

AFL-CIO President Lori Pelletier (ctnewsjunkie)

“Our budget should be based on investments in Connecticut’s workers, not austerity measures that further drag down an already struggling economy,” Pelletier said.

Sal Luciano, president of AFSCME Council 4, one of the largest state employee unions, said the governor’s budget feels like Groundhog Day because it focuses on cuts and austerity that will hurt Connecticut workers.

“Demanding nearly $1 billion in concessions from state workers is a back-door tax increase,” Luciano said.

He said the governor’s budget asks nothing of hedge funds or wealthy residents.

Malloy’s budget focuses its tax increases on lower and middle income residents.

Lindsay Farrell, executive director of the Working Families Party, said the governor’s budget plan asks those who can least afford it to shoulder the burden of closing the budget deficit.

“By and large, Governor Malloy’s budget plan shields the state’s high net worth individuals because of this belief, as he’s stated before, that raising taxes on wealthy people ‘punishes success’,” Farrell said. “The problem is that ‘success’ at the top hardly benefits the middle and working class people that enable it.”

The unions and the Working Families Party are asking lawmakers to consider proposals to tax hedge fund managers and another which ask large corporations like Wal-Mart to pay a fine if they don’t pay their workers $15 an hour.

Malloy’s budget eliminates the $200 property tax credit for homeowners making less than $100,000 a year and reduces the Earned Income Tax Credit for low-income workers, who pay more in sales and use taxes.

The budget also includes an increase in the cigarette tax bringing it up 45 cents to $4.35 per pack. The increase will not impact electronic cigarettes, according to Barnes.

The budget does not change the income or sales tax rates.