Legislature’s Democrats reach tentative agreement to balance 2010 budget

Leaders of the state legislature’s Democratic majority reached a tentative deal late Friday afternoon to close the $371 million deficit projected for this fiscal year, Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, said, adding the agreement reflects a new plan submitted by Gov. M. Jodi Rell.

House Democratic Caucus spokesman Douglas Whiting also confirmed the deal, which could lead to votes in the House on Tuesday and the Senate on Wednesday. Williams and House Speaker Christopher G. Donovan, D-Meriden, will seek to meet with the Republican governor Monday to determine whether she will support the measure.

Office of Policy and Management Secretary Robert L. Genuario, Rell’s budget director, said Friday that the governor had been meeting personally with legislative leaders this week in hopes of reaching an agreement. “We’ve been working with them in a collaborative fashion and hopefully it will bear fruit,” he said.

The plan largely relies on spending cuts outlined in a proposal offered Monday by Rell and a deficit-mitigation bill adopted March 27 in the Senate.

Williams declined to discuss specific elements of the plan, but confirmed that it does not include proposals to tax hospital gross revenues offered by Rell and by his caucus. “That doesn’t mean we’re giving up on that,” he said of the hospital tax, which has been proposed as a mechanism to draw between $65 million and $103 million in additional federal health care grants to Connecticut.

The Senate had proposed a 5.5 percent tax to raise $207 million, which state government would immediately redistribute to hospitals, giving more to facilities that treat more uninsured and Medicaid-funded patients.

Rell had offered a 3.25 percent tax to raise and redistribute $$130 million.

Williams said he expects the hospital tax would be discussed again as lawmakers and the governor negotiated revisions to the preliminary, $18.93 billion budget adopted last September for the 2010-11 fiscal year.

The Senate Democratic deficit-mitigation plan offered earlier this month would have raised an extra $70 million annually by boosting estate tax rates. Williams only would say that “the estate tax remains a bone of contention.”

The governor has opposed any change in the estate tax, which applies to inheritances worth more than $3.5 million.

Sources said that for a deal to be struck with Rell, an estate tax increase might be adopted, but in a separate bill from other deficit-mitigation measures. This would allow Rell to accept spending cuts and other changes she supports while rejecting the estate tax. In turn, Democratic lawmakers could claim they tried to force wealthier households to contribute more to alleviate the state’s budget woes.

Besides an estate tax hike, the Senate Democrats’ plan also had relied on more than $160 million realized by either cutting programs or by reassigning dollars originally designated for special trusts and accounts and moving them into the General Fund.

The rest of the deficit would have been eliminated through additional federal revenue, much of which would be drawn into Connecticut either through the hospital tax arrangement or by shifting state welfare and other health care programs under the federal Medicaid umbrella.

The governor’s latest plan raised no taxes, but features more than $170 million in spending cuts, many of which impact education and social services programs.

These include new cost-sharing requirements and restrictions on vision services for Medicaid patients, a cut to school-based health clinics, and a delay in planned funding for early childhood learning programs.

But the administration’s latest plan also embraces some spending reductions first suggested by the Democrat-controlled Appropriations Committee earlier this month. These include a wide array of education-related cuts targeting transportation, charter schools and bilingual education programs, further cuts to social services, and elimination of several vacant positions in both the Judicial and Executive branches.

Rell also would reassign $91 million originally designated for special trusts and funds.

Neither the governor’s latest plan nor the Senate’s include any reductions in municipal aid, and sources said the tentative deal struck Friday does not either.