Updated at 11:08 p.m. with deferral of the bonding legislation.
The House of Representatives brought Connecticut’s latest budget saga to a close late Friday.
The Democrat-controlled House voted 74-70 to adopt a $19.76 billion budget that closes a nearly $1 billion hole in the 2016-17 fiscal year without raising taxes or tapping Connecticut’s modest emergency reserve. Eight Democrats joined with all 62 Republicans present to oppose the measure.
But Republican legislators said during the six-hour debate that the budget doesn’t make the kind of structural changes needed to address the state’s long-range fiscal challenges.
The budget measure, which cleared the Senate on Thursday, now heads to Gov. Dannel P. Malloy, who is expected to sign it into law.
The House also adopted an omnibus measure to implement policy changes tied to the new budget.
But the chamber deferred action on a bonding package that cancels about $1 billion in previously approved borrowing to reflect declining state revenues. House Speaker J. Brendan Sharkey, D-Hamden, said he anticipates the House will take up the matter in the coming weeks. Malloy hopes the House and Senate will return to the Capitol later this month to enact his Second Chance Society anti-recidivism program.
“This is a painful budget, a budget that makes a billion dollars in cuts,” House Majority Leader Joe Aresimowicz, D-Berlin, said, adding it that while it minimizes pain to colleges, hospitals and municipalities, it still hurts many in need. “It’s not something were thumping our chest over, saying, ‘Boy we’re doing a great job.’ But we’re responding to the job before us.”
“Vote on this document for what it is,” Aresimowicz added. “It’s addressing the problems that are facing the state of Connecticut right now.”
Rep. Toni E. Walker, D-New Haven, co-chair of the Appropriations Committee, said the “austere” budget asks many Connecticut citizens, including some of its most vulnerable, to sacrifice so the deficit could be closed without increasing taxes.
“It is also our responsibility, of course, to assess the collective needs of the state of Connecticut, and I do mean all 169 cities and towns and all 3.5 million residents,” she said. “No one – no one – will say it is a good thing, but it is what we had to do.”
“Are we changing the state for the better beyond today, next week, next month, or until the next deficit occurs?” House Minority Leader Themis Klarides, R-Derby, asked. “If that’s all I can say, that there’s good things about this budget — in the dire fiscal situation we are in — that’s certainly not good enough.”
“We have set the bar so low that if there are no tax increases, it’s a great budget,” she said, criticizing legislators and the governor for not reforming the spending cap and for not doing more to reduce long-term labor costs. “There is nothing in here that changes the way we do business in this state.”
One of the Republicans’ chief alternatives to the Democrats’ budget choices was to reduce employee benefits and other labor costs that would require concessions from worker unions, which have declined to provide another round of givebacks.
The new budget quickly drew mixed reactions from labor and business.
“Governor Malloy’s budget, passed today with the help of Democrats in the legislature, is shameful,” said American Federation of Teachers’ President Randi Weingarten. “Rather than ask Connecticut’s wealthiest to pay their fair share, they’re laying off dedicated public employees and slashing services working people rely on.”
But Joseph F. Brennan, president of the Connecticut Business and Industry Association, called it “a first step in the long process of addressing Connecticut’s fiscal challenges. While the plan does not contain as many structural reforms as we would like, the spending reductions are recurring and will significantly reduce the size of the projected shortfalls in future budgets. The cuts are real, and they are difficult, but necessary. They are necessary because we are still paying the price for last year’s tax increases that cost us much-needed investment and jobs.”
Connecticut’s community-based, private, nonprofit social service agencies responded with gratitude tempered by concern.
“We thank the House and Senate for supporting the FY17 budget,” said Jeffrey Walter, interim CEO of the CT Community Nonprofit Alliance, which represents about 500 nonprofit agencies. “These are difficult budget times and this spending plan makes painful cuts. But it could be much worse, and does include funding to allow many programs to continue to provide life-sustaining services to some of the state’s most at-risk individuals and contribute to the overall quality of life in our state.”
“We realize and appreciate the difficult decisions they faced in balancing a budget, and we know that our legislators understand the harmful impact of these cuts on children and families,” said Rick Calvert, CEO of Child and Family of Southeastern Connecticut.
Outpatient psychiatric clinics, which were cut, treat children in the community at a lesser cost than serving them in state residential treatment centers, he said, adding, “These are critical services provided for Connecticut’s children, and we look forward to continuing to work with our legislative leaders to protect these life-saving programs and services.”
Spreading the pain around
The new budget scales back but does not eliminate previously approved increases in municipal aid and transportation, but does cut deeply into funds for employees’ salaries, requiring far more savings than are anticipated from the nearly 2,000 layoffs Malloy is ordering this spring.
Democratic legislators said they tried to spread reductions across most of the rest of the budget, thereby keeping them relatively small, often less than 2 percent.
Hospitals, nursing homes and community-based social services all face cuts, though the reductions aren’t as deep as those proposed earlier.
Funding for local education was cut more than $100 million from the original 2016-17 budget approved last June, and communities that lose funds in the Education Cost Sharing program — the single-largest education grant — would be allowed to reduce their local budgets to reflect that amount.
Similarly, Connecticut’s public colleges and universities would lose more than 7 percent of the funding promised to them.
The budget consolidates six legislative panels that advocate for various constituency groups into two, and cuts deeply into support operations for the legislature’s Program Review and Investigations Committee.
Nonunion state employees would be required to pay more for health care benefits and annual pensions for nonunion workers hired after July 1 would be capped at $125,000.
Raises for judges and a new sales tax exemption for diapers and feminine hygiene products both would be delayed one year.
The budget does exempt New Britain Stadium and the new Dunkin’ Donuts Stadium in Hartford from the state’s admission’s tax, allowing New Britain to keep about $100,000 annually and pumping $400,000 per year into Hartford.
Overall state spending would increase by just 0.4 percent compared with the current fiscal year. But spending would be almost $675 million, or 3.3 percent, less than called for in the original 2016-17 budget enacted last June.
These spending cuts would significantly reduce big deficits projected after the November elections, nonpartisan analysts said. The $2.2 billion gap in 2017-18 finances would shrink to $1.3 billion, while the nearly $2.5 billion deficit in 2018-19 falls to $1.4 billion.
GOP says budget relies on wishful thinking
The new budget does rely on some one-time solutions, sweeping $53 million from smaller funds and off-budget accounts.
It also counts on enhanced tax collections and payoffs from lotteries, growth in cigarette tax receipts — and even payments from currently unsettled state lawsuits — to remain in balance.
“The revenue side is what’s going to get us back here in a few months to do, God forbid, another deficit-mitigation plan,” predicted Rep. Melissa Ziobron of East Haddam, ranking GOP representative on the Appropriations Committee. She added the budget is like a consumer buying a lottery ticket and then a car immediately thereafter — assuming the first purchase would be a big winner.
Rep. Vincent J. Candelora, R-North Branford, said Connecticut’s fiscal structure has deteriorated to the point that a GOP proposal to cap annual borrowing sparked concerns from state Treasurer Denise L. Nappier that it could interfere with the state’s ability to pay its bills on time.
The state keeps both tax revenues and proceeds from borrowing in a common pool, and the treasurer has transferred borrowed dollars — temporarily — in the past when the state faced cash flow issues.
“We’ve reached a point where we can’t stop borrowing because we need to feed the beast,” Candelora said.
Republicans also criticized how the 291-page policy implementation bill was handled, noting it wasn’t made public until Thursday morning, just hours before the Senate had begun debating it.
One controversial component in that implementer, which was approved 73-70, changed the plan to share sales tax receipts with cities and towns to cap local property taxes on motor vehicles.
The budget bill raises the cap on car taxes from 29.6 mills to 32, but the implementer lifts it further, for one year, to 37 mills.
Democratic legislators said they were negotiating until the last minute with cities and towns on where to set the cap, given the funding available.
“No one promised a rose garden in this budget,” said Rep. Roberta Willis, D-Salisbury, co-chair of the Higher Education Committee. “There is no positive way to spin this deck of cards we have been dealt.”
Willis added the Republican budget proposal offered last month wasn’t pain-free either, noting that it cut more deeply into Connecticut’s community colleges than the Democratic plan does. Community colleges have faced large tuition hikes in recent years, and their reserves largely are depleted.
Aresimowicz said the Republican alternative budget had other flaws, with $70 million in questionable debt service savings, a reduction in manufacturing assistance and a cut to a tax credit that benefits the working poor.
“I’ve heard a lot of slogans,” from the GOP, he said, “but not a lot of solutions.’
House Speaker J. Brendan Sharkey, D-Hamden, noted the GOP offered several amendments during Friday’s debate, and while they included some components of the Republican alternative budget, none of them contained the full plan.
“The Republicans did not call their budget for a vote,” he said. I think that speaks a lot to the fact it’s easy to complain about the cuts that have to be made and the hard decisions that have to be made, which is what we’ve heard for the last six hours. But it’s a lot harder to actually have to produce not only the bill and the cuts but also the votes to pass it.”
Some Democrats opposed the budget
But there also were some Democrats who objected to the budget.
Rep. David Alexander, D-Enfield, said the decision last year to dedicate existing sales tax receipts to transportation and to municipal aid – despite deficit projections – amounted to a promise that government shouldn’t have made, and can’t keep. Instead it has led to mid-year deficits, worker layoffs and reductions in services to the poor.
“This budget continues the poor decisions from last year,” Alexander said afterward. “We’re obviously going to continue to run deficits.”
Rep. Daniel Rovero, D-Killingly, also noted that the car tax capping program had been scaled back so much that only 20 communities are projected to benefit from it. The rest of Connecticut’s 149 cities and towns’ property tax rates are not considered high enough for their taxpayers to benefit.
“I believe this is unfair,” Rovero said, noting that residents of all communities pay the sales tax that provides the resources for the car tax capping system. “Everyone deserves a break on their car taxes.”
Other Democratic representatives who voted against the budget were: Brian Becker of West Hartford; John Hampton of Simsbury; Cristin McCarthy Vahey of Fairfield; Russell Morin of Wethersfield; Christine Randall of Killingly; and Jonathan Steinberg of Westport.
Delayed bonding bill would cancel financing for many projects
The bond package that the House deferred action on Friday would cancel or delay about $1 billion in financing for a wide array of projects and programs.
Outside of this rebalancing process, the measure – which the Senate adopted late Thursday night – also authorizes $382 million in new borrowing for municipal school construction, down significantly from financing for local schools approved in recent years.
The cancellations affect dozens of capital projects involving public colleges and universities, municipal school districts, economic development programs, social services, housing, recreation and the environment, transportation, and numerous state facilities and information technology systems.
State law requires Connecticut to reduce planned borrowing when projected tax receipts fall below a certain threshold.