Lawmakers and local elected officials are bracing for Democratic Gov. Dannel P. Malloy’s budget address and what’s expected to be hefty cuts in order to balance next year’s more than $1.5 billion budget deficit.
Malloy has already said he plans to shift one third of teacher retirement costs to cities and towns and he plans on changing how education aid is calculated so that more of the $4.1 billion is going to poorer cities.
He’s also asked his agency heads last September to give him budget proposals assuming 10 percent reductions to what they would have received if the state had stayed in the black.
And he’s been asking state employee unions for more than a year to open up the health and pension portion of their contract to see if they can find any more savings. Almost all but one bargaining group has been negotiating with Malloy’s administration for more than a year over salaries and working conditions. So far, none of those contracts have made it all the way through the collective bargaining process.
Senate President Martin Looney, D-New Haven, said he will be watching Malloy’s speech to see exactly how the governor’s new Education Cost Sharing formula is distributed.
Looney said Malloy’s proposal to shift one third of teacher retirement costs to municipalities also has to be understood in a larger context.
Looney has proposed giving municipalities the ability to levy and keep an additional 1 percent of sales tax.
“The cost of the pensions might be more amenable if they are getting additional aid,” Looney said.
Hartford Mayor Luke Bronin has said that if the state allows them to collect a portion of the sales tax then he won’t need the state to bailout his city, which faces a $22.6 million shortfall this year and a more than $50 million deficit next year.
The governor’s budget proposal will also allow cities to levy property taxes on hospitals in exchange for more money from the state, according to sources. The taxing scheme will help the state leverage more federal Medicaid dollars, but expect Connecticut hospitals who are suing the state over its Medicaid reimbursement calculation to vehemently oppose it.
Betsy Gara, executive director of the Council for Small Towns, said her organization has yet to take a position on the sales tax issue, but she said given the cuts Malloy has already announced, none of what he offered as far as mandate relief is concerned will make cities and towns whole for their losses.
“Given the cuts that are on the table that the governor has already indicated are in his budget, none of those mandate relief items are going to put a dent in that,” Gara said.
She said giving cities and towns more control over the education portion of their local budget would be helpful.
Malloy did make several proposals a week ago that would change the relationship between municipal leaders and their local labor unions. For example, any increase in state funding in 2017 could not be considered by arbiters being asked to assess a community’s ability to afford employee raises. Malloy would also allow towns to negotiate employee contributions under the Municipal Employees Retirement System.
In addition, Malloy would also change the prevailing wage law for the first time in 25 years. He’s proposing increasing the threshold to $1 million for new construction and $500,000 for remodeling. That means projects valued under those amounts won’t be subject to the prevailing wage.
House Speaker Joe Aresimowicz, D-Berlin, said he’s concerned about municipal funding.
He said he hopes they can reach an agreement on a budget deal “sooner rather than later so that municipalities can know how much money they’re getting.”
Malloy has said he doesn’t plan on changing the sales or income tax, but he already said he planned to eliminate the $200 property tax credit claimed by about 874,000 middle-income residents — which for those who receive it could be considered a tax increase.
Looney said he believes that like Malloy’s first budget in 2011 the state will need to look at some combination of spending cuts, tax increases, and labor concessions.
“We are going to need some additional revenues and resources, we are going to need [a] state employee package and we are going to need cuts,” Looney said. “With the scope of the deficit we’re going to need all those things to close the gap.”
What remains to be seen is who will be negotiating the budget with the governor in May. Traditionally, the Democratic majority and the governor have been able to conclude negotiations without Republicans. However, Republicans made gains in the last election and have been offered a seat at the table. The question is how long will they be allowed to stay if they’re unable to produce any votes for the final package.