Governor’s $40-billion budget under fire at legislative session

State Sen. Toni Boucher (R-26), State Rep. Gail Lavielle (R-143) and State Rep. Tom O’Dea (R-125) held a legislative update at the Cannon Grange Hall on Thursday, June 18, where they discussed what went on during the Connecticut General Assembly’s regular session, which ended on June 3.Lavielle, who serves on the Appropriations Committee and Transportation Committee and is a ranking member of the Education Committee, said one of the “overwhelming circumstances that affects us all” is Gov. Dannel Malloy’s two-year, $40.3-billion state budget.“Since the year 2009, we have had tremendous tax increases and it’s always been a question of shall we cut services, shall we have tax increases and how do we balance those out?” said Lavielle.“The reason for that is because when the majority of the legislature puts this budget together, it essentially does not look at about 35% of the state’s costs, which are tied up in state employee benefits and compensation.”Lavielle said the latest budget has drawn criticism from many people.“This time, the budget increases spending, it increases taxes by a couple billion dollars, and everybody seems to notice and everybody seems to be upset,” she said.“We’re hearing from people we have never heard from before — people who don’t usually write to us, people from both parties, people who are very, very stressed because the taxes affect rich people [and] middle class people.” Cuts “From what I can tell, the governor basically detonated a nuclear bomb in Hartford,” said O’Dea, noting this is “the second-largest tax increase in history, behind the last time that they did it.” On June 12, Malloy proposed cutting $220 million in corporate taxes and finding an equal amount of spending cuts in order to balance the budget. “He cut a lot of what he could cut out and then decided across-the-board 1.5% cuts in spending,” said O’Dea, a ranking member of the Transportation Committee and a member of the Judiciary and Regulation Review committees. “The governor, behind the scenes, cut things he knew were not something that people could accept like social services.” The cuts would have a large impact on the Development Services, Mental Health, Addiction Services and Social Services departments, as well as state colleges and the University of Connecticut. “When you have the largest tax increase in the state followed by the second-largest in the state, that’s going to impact a lot of people,” said O’Dea. “I don’t care if you’re Republican or Democrat or independent or whatever you are — the tax-spending policies are killing this state.” O’Dea said he believes the state has to cut spending. “We can’t go at the rate we’re going. If we do cut taxes, I think we’ll see a significant amount of growth,” he said. “You can’t increase spending when we’re overtaxed.” Cadillac Tax O’Dea said “one of the worst bills to pass” is the Affordable Care Act’s Cadillac Tax — a “40% non-deductible excise tax on employer-sponsored health coverage that provides high-cost benefits,” according to cigna.com. “If you’ve got a really good health care plan, employers have to pay an extra tax, and that’s going to cost municipalities like Wilton and New Canaan 3 to $4 million — maybe 5 or $6 million.” Towns have been trying to negotiate with unions in order to avoid the tax, said O’Dea, but a recently passed bill takes away municipalities’ power to negotiate with unions. “It takes negotiating power away from municipalities and it allows state employees to negotiate for them — the town employees — at the sate level with the governor’s office,” said Boucher, a member of the Finance, Revenue and Bonding Committee and the Judiciary Committee, as well as a ranking member of the Education and Transportation committees. “They’re taking away the local control in a very significant way.” “All the work towns have been doing to avoid this Cadillac Tax — which is going to happen in 2018 — will result in 2 to $5 million more in expenses for health care plans,” said O’Dea. “The towns in Fairfield County, they all have the ability to pay — with the exception of Bridgeport, so they’re all going to be stuck in this state plan. It’s going to absolutely destroy our towns.” Car tax To provide tax relief, the budget proposes splitting off one percentage point of Connecticut’s 6.35% sales tax and using half of that amount to take care of a statewide cap on local car taxes. This cap is one of several provisions in Senate Bill 1 (SB-1) — introduced as a means to reform Connecticut’s tax system — that Lavielle said she found “really unusual.” Under the car tax provision, municipalities’ mill rates on motor vehicles would be capped at 32 mills in fiscal year 2017 and 29.36 mills in fiscal year 2018. A mill rate is the property tax rate per $1,000 of assessed value, or 70% of market value. With the intention of providing tax relief, this statewide cap would “allow towns to continue taxing residents at a lower rate,” according to a May 21 article in The Bulletin’s sister paper, The Darien Times. “What they want to do is take a percent of the sales tax generated from all over the state, bring it up to the state level and use that money to make the towns that must increase their mill rate whole, like Bridgeport,” said Lavielle. “The money would go up to the state and then the state is supposed to redistribute it to the towns losing money from having a capped car tax.” Lavielle said the interesting part about the car tax provision is that “it doesn’t happen immediately,” but rather a “couple years out when the cycle is already over.” “For the first two years of this budget, the towns that have lost money by lowering their taxes on their cars won’t get that money back,” she said. “They’re stuck without it, so they’re going to have to make it up somehow and the only way to do that in Connecticut is to raise property taxes.” Transportation The other half-percent of the sales tax would go to fund the state’s special transportation fund, which covers infrastructure like roads and bridges. “The budget says we’re going to give some new funding to transportation and that’s going to come from another half-percent of the sales tax, which will [come] from all over the state and go to the special transportation fund,” said Lavielle. “But for the next two years, they’re going to take out the money that used to go into the special transportation fund every year from the general fund and they’re going to cancel that.” While the governor’s tentative budget dedicates $436 million in sales tax receipts to transportation, it also withholds $371 million from the general fund, which is normally designated for transportation. As a result, Lavielle said, the special transportation fund will “actually have $32 billion less next year than it has now.” “We hear that the transportation budget is going to be funded now and there’s going to be lots of fun and exciting projects, but there’s still no money there to do it with,” said Lavielle. Special session A special legislative session has been called following the end of the General Assembly’s regular session. Lavielle said “it took quite a while to muster the votes overnight” on June 3 — “we spent 24 hours straight in the House before they called the budget.” Because of that, she said, “things got very, very sloppy at the end of the session” and in a “last-minute mad scramble to get the budget through,” a number of substantive bills needed to implement the budget were left unfinished. “Lots of things just fell off the shelf, so we’re going back — we think it’s the 29th, but it may change,” she said, “and there will also be some suggestions from the governor about changing the budget slightly to accommodate what businesses want.” Boucher said one reason why the date of the special session may change is because “nobody can agree. … There’s a tremendous amount of division and there’s a lot of non-communication.” On June 28, Malloy must either “veto the budget or do nothing and it will go into effect,” said Lavielle, “so there are some questions as to whether the special session will be held before the date that he would have to take some action on the budget.” Either way, the state will still be facing a budget deficit after these two years, according to Lavielle. “After this budget cycle is over,” she said, “the state will be facing yet another $6-billion deficit.”

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