HARTFORD, CT — House Democrats would hike the sales tax to 6.85 percent, and eliminate Gov. Dannel P. Malloy’s controversial proposal to have cities and towns partially fund teacher’s retirement costs. That’s according to their latest budget proposal.
Malloy has already expressed his displeasure with any broad based tax increase, even though shifting teacher pension costs to municipalities would likely cause an increase in property taxes.
“My view is that we shouldn’t raise the sales tax to 6.85,” Malloy said Wednesday following the opening of the new University of Connecticut campus in downtown Hartford.
The sales tax increase raises $327.8 million in 2018 and $335.4 million in 2019.
Kelly Donnelly, a spokeswoman for Malloy, said the proposal is “not something the Governor could support in its current form. With that said, it is well understood that they intend to negotiate many of the specific suggestions in this document.”
The sales tax increase, according to a press release, would “help maintain funding for cities and towns.”
However, municipal aid and education funding is reduced for every town except Ansonia, which will receive a $3,015 increase over last year. The total reduction in town aid and education funding is about $122 million and each town is impacted differently, but even the state’s three largest cities lose money.
At the same time, it looks as if the House Democrats’ budget increases spending over the current year’s budget by about $37.5 million. However, the House Democrats say that this is because their proposal includes $61 million in revenue for a 1 percent local option tax on food and beverages at restaurants. The House Democrats say that money is supposed to go back to the cities and towns that may, in the future, vote in favor of the 1 percent restaurant tax. That disbursement would be an expenditure by the state. But without that $61 million revenue line item, the House Democrats say their budget proposal reduces spending by $23 million over the current year.
“Although raising revenue is always a last resort, it is a necessary step to ensure that we continue to have a great education system that attracts so many young families to our state,” House Majority Leader Matt Ritter, D-Hartford, said. “Our goal is not to simply protect our school systems, it’s to make them even stronger in every town across the state.”
The Connecticut Conference of Municipalities said the cutbacks in state aid, while significant at more than $120 million statewide, represent considerably less than the draconian cuts called for under the governor’s executive order. That being said, CCM said they are still concerned that 25 communities will receive no education funding and another 25 communities will see significant reductions in education aid.
Senate President Martin Looney, D-New Haven, who admitted a sales tax increase would be a tough sell for some members of his caucus, said they appreciate the effort put into the proposal.
“It is in everyone’s best interest that we soon reach an agreement on a budget,” Looney said. “Democrats in the Senate have been working hard to produce a final balanced budget proposal that provides predictability and stability to families, service providers and businesses.”
Senate Democrats have not publicly shared their latest budget proposal. Neither have House or Senate Republicans, whose budgets fell out of balance after the General Assembly passed the $1.57 billion labor concession package.
While each Republican caucus said they’d revise their proposal, none of those proposals have been shared with the news media. The Senate Democratic caucus budget release is still being determined, according to a spokesman.
Senate Republican President Len Fasano, who has been critical of Democratic proposals in the past, said that he was going to save his comments for the negotiating table.
“Bringing ideas to the table certainly helps to move the process along and is what Republicans have been waiting for,” Fasano said. “I just received the proposal and will be reviewing it in greater detail. At this point, my comments on specific elements of this proposal are best left for the negotiation table.”
Fasano said he would not be releasing the latest revised version of his budget until they are able to sit down and negotiate structural changes with Democratic lawmakers.
“The first step is we have to agree on structural changes.,” Fasano said.
House Republican Leader Themis Klarides, R-Derby, said she can’t believe that it took “the House Democrats eight months to come up with another $1 billion tax hike as the only means to solve the state’s financial crisis.”
Klarides noted that the proposal would increase taxes in the first year of the budget by $639 million and by $693 million in the second. Everything from cigarettes to luxury items to prescription drugs to digital downloads will be taxed at higher rates and $50 million in motor vehicle fees are slapped on as well.
“These tax hikes will slam the middle class and further erode our quality of life in Connecticut,” Klarides said.“The Democrats want to continue down the path that has led us to the precipice of fiscal ruin.”
The House Democrats’ proposal also erases Malloy’s proposal to allow hospitals to be taxed locally on their property and eliminates the governor’s proposal to have municipalities pay part of the teacher retirement costs.
Betsy Gara, executive director of the Council for Small Towns, said they appreciate the elimination of the shift in teacher retirement costs. “However, we are very concerned that the budget proposed by House Democrats continues to include deep cuts in education funding for dozens of towns across Connecticut,” Gara said. “Cuts of this magnitude will drive increases in property taxes and/or cuts in critical services in these communities.”
On the spending side it would reduce layers of non-union management in state government. And it would allow towns to regionalize services through collective bargaining.
The narrative of the proposal also says it would consolidate “local assessor offices to achieve economies of scale,” and require “state agencies and municipalities to consolidate offices and create one-stop government centers.”
The proposal was shared with legislative leaders and the governor, who haven’t met for a budget negotiation since the end of June.