5 things to know about the new state budget plan

state budgetsUpdated Friday to reflect the revised car tax cap passed Thursday night (see item 3).

The Senate is expected to vote today on a $19.76 billion spending plan for the upcoming fiscal year intended to wipe out a $1 billion deficit.

Proponents of the deal, reached by majority Democrats in the legislature and Gov. Dannel P. Malloy’s administration, tout it for avoiding tax increases while making cuts that could lead to structural change. But critics question whether it’s really balanced and say it doesn’t make the kind of changes needed to avert deeper fiscal woes in the future.

Here are five things to know about the new budget plan.

1. It counts on a big reduction in the state workforce.

A major source of savings – just over $300 million – comes from cuts to salary accounts in state agencies. That includes a cut of $35.1 million from employee salary costs in the Judicial Department, $45.8 million in the Department of Correction, and $50.4 million in the Department of Developmental Services. The Malloy administration is already in the midst of layoffs, and anticipates the state will shed about 2,500 jobs through layoffs, retirements and attrition.

But achieving the level of salary savings built into the budget deal is likely to require eliminating even more jobs than the ongoing layoffs and retirements are expected to cut. Nonpartisan analysts have estimated it would take more than 2,900 job cuts just to save $200 million per year – significantly less in savings than the budget counts on.

2. Social service programs will be cut – but not by as much as in some proposals – and municipal aid will take a hit.

The budget includes cuts to a wide range of social service programs, including grants for mental health and substance abuse treatment, cash assistance for poor state residents, independent living centers for people with disabilities, and school-based health centers. But many of those cuts are not as steep as they could have been under other proposals made during the budget process.

Cities and towns, meanwhile, will see a reduction in funding for education and the grants some receive to offset lost revenue from property tax-exempt colleges, hospitals and state-owned land, and other tax breaks. The impact on each municipality varies, however. Hartford, New Haven and Bridgeport would see the biggest boosts in funding, while Middletown, Greenwich and Fairfield would lose the most.

To see how each municipality fares, click here.

To see how specific programs fared under each proposal and the final deal, check out The Mirror’s budget tracker by clicking here.

3. Two major initiatives from last year got cut back.

cars in trafficOne is a plan to cap motor vehicle taxes in some municipalities, which would be funded by giving cities and towns a portion of state sales tax receipts to offset the loss in property tax dollars.

The version passed last year would have required that municipalities cap car taxes at 29.6 mills – that is, $29.60 for every $1,000 in assessed value. About 50 municipalities have tax rates above that threshold, meaning their residents would have seen a car tax reduction. This was a major initiative of Democrats in the legislature last year, and something they were expected to tout as they run for re-election this fall.

But the budget deal would reduce the amount of sales tax money cities and towns get to offset lost car tax dollars, and would adjust to that lower level by raising the car tax limit to 32 mills, according to the nonpartisan Office of Legislative Research. The cap was subsequently raised even higher, to 37 mills, in a separate bill adopted Thursday night.

According to Senate Republicans, increasing the cap to 37 mills would mean people in the following 32 communities – those with tax rates between 29.6 and 37 mills – would not see a reduction in their car taxes: Ashford, Beacon Falls, Bethany, Bethel, Bloomfield, Bolton, Bristol, Chaplin, Durham, Glastonbury, Granby, Hebron, Marlborough, Meriden, Middlefield, Middletown, Monroe, Newington, Newtown, Plymouth, Portland, Scotland, Seymour, South Windsor, Stafford, Stratford, Thomaston, Tolland, Vernon, West Haven (only the special taxing districts), Winchester, Windham. (Note: An earlier version of this list incorrectly listed Wethersfield, which has a mill rate above 37.)

The budget deal would also reduce funds dedicated to transportation infrastructure projects, a major initiative of Malloy’s second term. The budget cuts $50 million of the $130 million in new revenues earmarked for transportation. Though the administration says most of this will be reflected in reduced services, the budget also cuts $15 million for highway and rail projects paid for out of the budget rather than financed long-term with bonding.

4. Some of the cuts remain to be determined.

Of the almost $675 million in cuts, more than $200 million comes from “lapses” – that is, money that doesn’t get spent. In other words, the plan leaves it to the Malloy administration to find more than $200 million in cuts that haven’t yet been specified.

In the past, Malloy has turned to hospitals, higher education and social service programs for cuts when faced with midyear deficits that required spending reductions. But the budget deal limits the governor’s ability to take money from hospitals.

While the governor can unilaterally cut up to 5 percent from many line items, the budget deal effectively reduces the level of funding Malloy can take from hospitals without legislative approval by giving hospital supplemental funding – a recent Malloy target for cuts – its own line item. In the past, that money has been included in the nearly $2.5 billion Medicaid line item, which the governor could cut unilaterally by close to $120 million. Now Malloy can only cut up to 5 percent of the $40 million in hospital supplemental funding without legislative signoff.

5. There’s an even tougher budget challenge looming.

The backdrop to this year’s budget debate has been the question of what comes next: Nonpartisan analysts projected this spring that the 2017-2018 budget would be $2.1 billion in deficit. That meant that legislators next winter would be grappling with a problem more than twice the size of this year’s budget hole.

Those analysts reported this week that the budget deal takes a big chunk out of the next deficit because much of the savings would continue forward. Even so, if their projections are correct, the winners of this fall’s legislative elections will come to work in January with a $1.27 billion budget deficit to close.

Republicans have warned that the state is likely to face tax increases after the November election.

Comments

comments