Williams tries to revive deficit bill

Senate President Pro Tem Donald E. Williams Jr. spent much of Monday trying to extricate himself from between a fiscal rock and a hard place–better known as Gov. M. Jodi Rell and House Speaker Christopher G. Donovan of Meriden.

The vacationing Republican governor’s staunch defense of a $70 million annual tax break for residents inheriting multi-million-dollar estates helped thwart Williams’ efforts Saturday to balance this year’s state budget. Williams, a Democrat from Brooklyn, couldn’t get Rell to return his telephone calls on Monday.

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Williams at least got to sit down and talk with Donovan, a fellow Democrat. But the 90-minute meeting Monday yielded little progress, as the speaker said he won’t consider the Senate’s cuts to the social safety net while Rell continues to shield the wealthy.

“We need the governor working on behalf of the people of Connecticut and not some partisan cause,” said Williams, who also charged Rell with protecting a new tax break for some of the state’s wealthiest families while the budget is drowning in red ink. “That does not serve the interests of the entire state and that will not solve our fiscal problems.”

Pressed by moderate forces within the Senate’s Democratic majority, Williams tried to force the issue late last week and hammer through a bill to eliminate this fiscal year’s deficit, and remove about 10 percent of the shortfall projected for 2010-11.

State Comptroller Nancy Wyman’s last budget forecast on March 1 reported a $518.4 million hole in this fiscal year’s $18.64 billion budget. Her next official projection is due Thursday.

A concession package negotiated with unionized workers last year allows the state to reduce this year’s contribution to employee pension funds by $100 million. That cut, combined with $12 million in other reductions ordered under the governor’s emergency powers and a $44 million increase in federal aid to cover prescription drug benefits, would bring the deficit closer to $360 million.

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The Senate voted 21-15 to adopt a bill that would have pushed state government marginally into the black this year, and reduced the $725.7 million deficit projected for next fiscal year by $35.3 million.

But before the bill even went to a vote in the Democrat-controlled Senate, Rell vowed to veto it, calling it “woefully short on real spending cuts and burdensomely high on tax increases.”

The plan included two tax hikes.

The first, a 5.5 percent levy on hospital gross revenues, was part of a plan to both raise $207 million per year, and redistribute those dollars right back to hospitals as part of a scheme to leverage $103 million in additional annual federal Medicaid payments to state government. Rell had suggested a similar back-and-forth arrangement, but at a lesser 3.25 percent rate, raising and spending $130 million and securing an extra $65 million from Washington.

The second, and more controversial according to legislators from both parties, was the Democrats’ efforts to reverse a $70 million-per-year tax break for heirs to multi-million-dollar estates. That break, which took effect Jan. 1, raised the threshold for estate tax exemption from $2 million to $3.5 million. It also cut the tax by 25 percent on estates valued between $3.5 million and $10.1 million.

Democrats, who control both the House and Senate, argue that given the huge deficits state government is facing, Connecticut can’t afford that tax break any longer.

But the plan also included some spending cuts

Senate Democrats offered up nearly $150 million in cuts that hit a wide array of social service, health care and education programs. Some of the programs targeted that traditionally have been off-limits for Democrats included:

  • Reductions to vision services for Medicaid patients.
  • Higher co-payments for poor families receiving health coverage through the Husky plan.
  • Non-emergency dental services for state welfare recipients.
  • School-based health clinics.
  • Early childhood learning programs.
  • Teen pregnancy prevention classes.
  • And transportation services for the elderly.

The Senate bill also targeted just over $21 million in savings to be produced by canceling longevity pay bonuses and requiring an extra furlough day for non-union workers, and by eliminating 21 deputy commissioner posts in the Rell administration starting July 1.

The measure also would redirect more than $60 million originally assigned to various special funds and accounts to bolster the General Fund. Among those transfers are: $10.4 million to be taken from the Special Transportation Fund, $6 million cut to the public financing program for state elections, and $3.5 million from the biomedical trust fund.

In fact, after the extra tax dollars raised and spent in connection with the hospital tax scheme are removed from the picture, the spending cuts offered in the Senate bill exceed the value of the estate tax.

Donovan, who balked at voting on the safety net reductions Saturday after Rell made her veto pledge, said that while he still believes his caucus is willing to make sacrifices in this area, members don’t want to offer them if the governor is determined to reject them.

“We would have passed it in the House. We were ready to move forward,” he said. “We’ve moved in the governor’s direction. But we can’t have a stalemate. She has to be ready to move too.”

The speaker said he told Williams would seek a face-to-face meeting with Rell today, and that the House could be ready to vote on the deficit-mitigation bill as early as Wednesday – if the governor is willing to compromise. “I want to have a heart-to-heart with the governor and see if we can really get out of this.”

Rell, who is due back today from a vacation in Colorado, issued a statement Monday through a spokesman reasserting her opposition to the Senate bill, and particularly to the tax hikes proposed.

“Governor Rell did not make a veto threat. She made a veto promise,” the statement read. “Majority Democrats continue to show that they simply cannot cut spending and reduce the size and scope of state government.”

Republican legislators who serve on budget panels rushed to Rell’s support Monday, arguing the stalemate over the deficit isn’t due to the governor’s support for the estate tax break, but rather due to Democrats’ inability to respond earlier to the fiscal crisis.

“You can’t look at this in a vacuum,” said Rep. Vincent J. Candelora of North Branford, ranking House Republican on the Finance, Revenue and Bonding Committee. Rell offered five deficit-mitigation plans last fiscal year and Democrats rejected most of the spending cuts she proposed then, ultimately leading state government to borrow about $1 billion to balance its books in 2008-09.

This year, he added, has been little different. “The legislature has failed completely to react to anything,” he said. “What we are seeing now are acts of desperation as we run out of time.”