HARTFORD, CT — The two-year, $43.35-billion state budget was approved by the House mostly along party lines Monday.
The bill passed 86-65 with 5 Democrats joining Republicans in voting against it.
CLICK TO VOTE ON HB 7424: An Act Concerning The State Budget For The Biennium Ending June Thirtieth, 2021, And Making Appropriations Therefor, And Implementing Provisions Of The Budget
The budget raises $861.5 million in additional revenue in the first year, and $921.3 million in the second year of the budget, helping to close a $3.7 billion deficit.
Republican Minority Leader Themis Klarides said the budget proposal had “no direction and no philosophy” except “for taking more money out of people’s pockets.”
Majority Democrats pointed to keeping municipalities whole, funding education and preserving benefits for seniors without raising the income tax.
There were few proposed spending cuts, so the nine-hour debate in the House, which started around 1:30 p.m. Monday, focused mainly on the tax increases.
The budget increases sales taxes on certain services, institutes a mansion tax on homes valued at more than $2.5 million, and reduces tax credits for small businesses. It does not include the increase in the capital gains tax from 6.99% to 8.99%, which had been sought by the progressive wing of the Democratic caucus.
In order to win the support of those members, Democrats decided one year after implementing the pass-through entity tax and corresponding credit to now reduce the credit from 93.5% to 87.5%. The result will be $50 million more in revenue to the state.
The business community complains that this change in policy will impact small-business owners the most, instead of the wealthy that Democrats were intending to target.
The budget ends some sales tax exemptions, essentially adding a 6.35% sales tax to digital downloads, dry cleaning, parking, and interior design services.
It increases the sales tax by 1% on meals and drinks sold by “an eating establishment, caterer or grocery store,” making it more expensive to dine out.
The budget also diverts about $58.2 million in revenue that was supposed to go to the Special Transportation Fund in the first year, and $119 million in the second year.
“Whether you call it a sweep, a diversion, a drop on the floor — it is a broken promise,” Rep. Laura Devlin, R-Fairfield, said.
She said when voters of Connecticut thought they were voting on a constitutional amendment last year that would lock up the transportation funds and make sure they were going to the Special Transportation Fund, Republicans knew better.
“We are not sweeping anything from the Special Transportation Fund. These were revenues that were projected to go into the Special Transportation Fund,” Sen. John Fonfara, D-Hartford, told Devlin earlier in the day. “There will be revenues continuing to go in but not at the same rate.”
Devlin said the distinction doesn’t matter to people at home who don’t care whether not putting money in is the same as sweeping or diverting the money before it gets there: “It’s the same thing,” Devlin said.
Rep. Jason Rojas, D-East Hartford, maintained that the Special Transportation Fund would stay solvent because more revenue from the new car sales tax is remaining in the fund than Lamont initially proposed.
Republicans believe Democrats are laying the groundwork for putting tolls on Connecticut’s highways. Democrats maintain they’re not going to discuss tolls until a special session.
Klarides called this the first partisan budget in two years.
“This is just pushing more and more people out of the state,” Klarides said of the Democratic budget. Her minority caucus did not produce an alternative budget proposal.
She said people can only take so much. Klarides pointed to taking $50 million from small businesses by capping the pass-through entity tax credit, increasing the minimum wage, instituting Paid Family and Medical Leave, “and, God forbid, tolls.”
“It’s like the buttons on your shirt. I mean you can only gain so much weight before the buttons pop,” Klarides said.
House Majority Leader Matt Ritter, D-Hartford, said the budget avoids a nursing home strike and invests in Connecticut — while remaining under the constitutional spending cap.
The budget is only $200,000 under the constitutional spending cap in the first year.
Rep. Vincent Candelora, R-North Branford, said this budget “pickpockets” people when they park their car and when they go to the laundromat.
“What does this budget represent? What are we standing for?” Candelora asked.
Rep. Chris Davis, R-East Windsor, said the middle class is being squeezed left and right by “increased sales taxes, by increased spending and increased borrowing.”
Davis said these are old habits that have gotten the state into the problems it has been dealing with for decades.
“It’s going to make it that much harder for an individual to live here in Connecticut, to be employed in the state of Connecticut, to start a business here in Connecticut,” Davis said.
Connecticut’s fixed costs are rising, which is why some decisions were made, Appropriations Committee Co-Chair Toni Walker, D-New Haven, said.
Lamont said the budget is “balanced honestly and puts us on a sustainable path to a more competitive future.”
Lamont touted the elimination of the $250 business entity tax, which is paid every other year by businesses big and small. On the flip side, the budget increases the registration fee for businesses from $25 to $60.
“We apparently can’t just eliminate a tax in a clean manner,” Klarides said.
The budget uses $381 million in surplus in order to re-amortize the teacher’s pension fund, and another $160 million to settle the dispute with the Connecticut Hospital Association over the provider tax.
The budget eliminates a scheduled reduction in the hospital tax rates by maintaining them at the 2019 levels. At the same time, it requires the base year for calculating the tax to be adjusted each biennium, and it requires the Department of Social Services Commissioner to issue refunds if the effective hospital tax rate exceeds the rate permitted under federal law.
Lawmakers have struggled with funding teachers’ pensions for years. Ritter said they found a creative way to deal with the problem, keeping bond-holders happy, while making sure it’s funded for years to come.
Toward the end of the debate, lawmakers focused their attention on about $1.9 million in youth violence initiatives.
Rep. Gale Mastrofrancesco, R-Wolcott, questioned why certain organizations were receiving money.
Walker said all the organizations are nonprofits that are evaluated every year based on the outcomes the children experience.
Mastrofrancesco questioned why a group called “Divas on the Move” was receiving $5,000.
Members of the Black and Puerto Rican caucus were upset and offended by Mastrofrancesco’s comments since many of the grants were going to organizations in their communities.
Ritter said investing in people and programming is not “pork.” He said these urban communities don’t have the same ability to raise money as their suburban neighbors.
Ritter maintained that Republicans can’t complain about the Democratic budget because they didn’t release their own budget this year.
“What was your alternative?” Ritter said. “To go through an entire winter, an entire spring — and it’s almost summer — with no budget document is shocking.”
