Legislative Leaders Reach Tentative Deal, Malloy Remains Skeptical

HARTFORD, CT — Legislative leaders emerged Wednesday from a Democratic caucus room at the State Capitol to announce they reached a tentative framework for budget deal they may need to pass with a veto-proof majority.

That’s because they’re uncertain whether Democratic Gov. Dannel P. Malloy will support their bipartisan compromise.

House Minority Leader Themis Klarides, R-Derby, said she hopes Malloy will sign the compromise, but if he doesn’t “we will have other options available to us.”

She said that’s why it took them 13 days to reach a budget deal because they had to plan for a second option.

“It’s not just about knowing what option one is,” Klarides said. “It’s about knowing what option two is, and what are chances of getting there are.”

House Speaker Joe Aresimowicz, D-Berlin, said staff will draft the budget over the weekend and if they don’t have to go through a prolonged veto process by making some small changes then they want to hear about them from the governor.

“Let’s all agree the public wants a bipartisan agreement signed off by the governor to move the state forward,” Aresimowicz said.

It’s unclear exactly what the budget deal includes. Legislative leaders said they will make more information available after they present it to rank-and-file lawmakers over the next few days.

Malloy has been running the state by executive order since July 1. On Aug. 18, Malloy revised his executive order and canceled the first quarter of the Education Cost Sharing grant for 85 communities and reduced the grant for another 54.

More recently, a Wall Street rating agency changed its outlook for Connecticut’s general obligation bonds from “stable” to “negative” and another warned it could downgrade the bond ratings of 26 municipalities and three regional school districts, while lowering the outlook for an additional 25 municipalities and three regional school districts.

Shortly, after leaders announced their tentative deal Wednesday, Malloy tossed some cold water on it.

He said there are some things in the budget he may find objectionable. He said if he vetoes the budget “there will be no hospital tax deal.”

The hospital tax deal that Malloy is referencing is an agreement between the state and the hospitals to tax them at a rate that will leverage more federal reimbursement, and the state has agreed to give the hospitals back more of that money than it has in the past.

He said he can’t support the hospital tax that’s part of a budget he can’t sign. He has also expressed a desire to resolve the lawsuit brought against the state by the Connecticut Hospital Association and 20 hospitals over the current version of the tax. The two sides are expected to be in court Thursday for the first time since June.

Malloy said legislative leaders even admitted the budget at the moment is not balanced.

“If I had ever come and told you that I have a budget in my head, but I’m still arguing with myself therefore I can’t tell you the details of it, but believe me I have it — you wouldn’t believe it,” Malloy told reporters Wednesday.

He said without a document, “it’s very difficult to have a celebration.”

But there are likely to be a few groups who are celebrating.

Legislative leaders said municipalities won’t be asked to pick up any of the cost of the teacher’s retirement program.

Malloy, even in his latest budget, wanted municipalities to phase in part of the cost of teacher pensions.

Local elected officials objected and some even said they would challenge such a move in court.

“While CCM awaits details on the proposed budget agreement among state legislative leaders, we are encouraged that the agreement — which does not include a municipal contribution to the Teachers’ Retirement Fund — will be presented to each legislative caucus,” Joe DeLong, executive director of the Connecticut Conference of Municipalities, said.

Legislative leaders have understood where the governor was coming from on the issue, but agreed it was the most objectionable part of the budget.

Senate Republican President Len Fasano, R-North Haven, said the six leaders stayed in the room and agreed to see past where they were within their own parties to make a deal.

“We believe it was moving the state in the right direction,” Fasano said. “… Whatever the governor does or doesn’t do will work itself out in the days and votes to come.”

Republicans had wanted to change how state employee retirement benefits are calculated in the future, but agreed to give that up in order to get a deal.

“That would be a deal killer,” Fasano said. “We brought up the point and we still believe those are substantive changes that need to be made.”

Democratic legislators said they gave more than they expected to give on the definition of a spending cap and bonding cap.

The public has been waiting for lawmakers to adopt a spending cap for 26 years, but not even the commission they appointed last year to come up with a recommendation was able to reach an agreement. The sticking point for them was the inclusion of pension debt as part of that definition.