Tax break proposal for retired Connecticut teachers still alive

An elementary school teacher in Bristol

CT Mirror file photo /

An elementary school in Bristol

Although Gov. Dannel P. Malloy scrapped two major budget initiatives Monday in the face of declining revenue projections, a third proposal involving a new tax break for retired teachers remains alive, sources close to ongoing budget negotiations said.

The proposed tax exemption, tied to teachers’ pensions, might still be subject to modification before a final budget is adopted.

The administration does not comment on its private negotiations with legislators. Both sides are working to enact a compromise budget for the new fiscal year before the regular 2014 General Assembly session ends on May 7.

Malloy sent legislators a letter Monday indicating he was pulling two proposals for the new budget off the table: A $55-per-person tax rebate for low- and middle-income households, which would have cost $155 million; and a supplemental $100 million payment into the state employees’ pension fund.

But Malloy offered no hints about his proposal to exempt 25 percent of retired teachers’ pensions – if they live in Connecticut – from the state income tax in 2014, and to exempt 50 percent in 2015.

This would cost the state between $23 million and $24 million annually.

The governor cited declining state revenue projections while announcing the initiatives he suspended. Although a final revenue report isn’t due to the legislature until Wednesday, nonpartisan analysts said Monday that income tax receipts alone are on pace to finish $277 million below budgeted levels this year.

That would chop away more than half of this year’s $505 million projected surplus.

Further complicating matters, Malloy conceded this trend means revenue projections for the new budget, which begins July 1, also must be lowered by “several hundred million dollars.”

That means all budget proposals for 2014-15, including Malloy’s, would be significantly in deficit.

And with both parties ruling out tax increases in a re-election year, the remaining options to re-balance the next budget involve scaling back or eliminating new tax breaks, cutting spending programs, or spending the remaining surplus.

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