Obama budget mixed bag for Connecticut

Washington — President Obama’s new budget request would be tough on Connecticut’s hedge fund managers and its defense industry.

But it could provide a lift for the state’s community colleges, small manufacturers and doctors.

Obama on Monday sent Congress a $3.8 trillion budget for 2013 that’s likely to intensify election-year battles over spending and taxes. The budget would go into effect Oct. 1.

The president’s budget would cut dozens of federal programs — from crime-fighting grants to weapons systems — and raise taxes on the rich.

The spending plan would end Bush-era tax cuts for wealthy Americans, eliminate depreciation rules for corporate jets and close a loophole for hedge fund managers that allows their income to be taxed at the capital gains rate of 15 percent. Under the president’s plan, the tax rate on hedge fund income would more than double.

Connecticut is home to nearly 30 hedge funds.

Noting that the president’s tax plan would have an impact on the state’s wealthier residents, Dan DeSimone, director of Connecticut’s state office in Washington, D.C., also said, “But the White House would argue the increased revenues would be used to help others.”

The president proposed creating a new $8 billion fund to train community college students for high-growth industries and provide incentives to schools whose graduates are getting jobs.

“That’s one area in the budget that could work very well for us,” DeSimone said.

Obama also proposed increasing infrastructure spending, which would also help the state, and a “doc fix” that would change the Medicare formula that pays physicians.

Although the budget would increase the deficit by about $900 million, the red ink would flow more slowly than it has in the past few years.

But Republicans. calling Obama’s accounting a “gimmick,” said his budget is dead on arrival.

“The president has ducked responsibility; he has punted again,” said House Budget Committee Chairman Paul Ryan, R-Wis.

Connecticut Republicans also slammed the plan.

Former Rep. Chris Shays said, “it doesn’t address the serious challenges confronting our nation.”

Linda McMahon, who, like Shays, is a Republican candidate for U.S. Senate, said the budget is “leading straight over a cliff to bankruptcy.”

Under the president’s plan, the Pentagon’s budget would be cut by 1 percent, or about $5.1 billion.

To help reach that goal, there would be a slowdown on the Pentagon’s purchasing of the Joint Strike Fighter, whose engine is produced by Pratt & Whitney in Connecticut. There would be a two-year delay in a ballistic missile submarine, and one of the two new Virginia-class submarines would be postponed until 2018. The submarines are under contract with Electric Boat.

Electric Boat spokesman Bob Hamilton indicated that the Pentagon’s budget will likely be modified by Congress.

“This is the first step in a lengthy budget development process that will unfold through the summer and into the fall,” he said Monday.

Sen. Joe Lieberman, a Connecticut independent, Sen. Richard Blumenthal, D-Conn., and Rep. Joe Courtney, D-2nd District, found a silver lining in the defense cuts.

The lawmakers, who sit on Armed Services committees in the House and Senate, said in a joint statement that they are glad the Pentagon proposes to spend $4.3 billion on the Virginia-class submarine next year.

“We are pleased with the budget’s strong commitment to the future of our nation’s submarine force and industrial base in the face of significant budget pressures,” the lawmakers’ statement said.

The president also called for two new rounds of base closings and an end to “unnecessary and lower-priority programs such as the C-27 airlift aircraft,” a plane that is slated to be flown by Connecticut’s 103rd Airlift Wing.

Connecticut National Guard spokesman Col. John Whitford said the airlift wing hopes to hold on to planes it is flying now until they receive from the Air Force some C-12 “Huron” airplanes in 2014.

“We are planned and ready,” Whitford said.

Other proposals in the budget could hurt the Malloy administration and  local governments.

The president wants to phase out a Medicaid provider tax that Malloy has used to help balance his budget. The White House also wants to “blend” Medicaid rates with the rates received from the federal government for a health program for children. That could mean fewer federal health dollars for Connecticut.

The budget would also make substantial cuts to community policing programs and local crime-fighting grants.

In addition Obama would fund the heating aid program for the poor known as LIHEAP at $3 billion, about $500 million less than this year’s appropriation for the program.