Gov. M. Jodi Rell pledged Thursday to veto a bill that would require Connecticut consumers to pay $1.8 billion on their electric bills over the next decade to balance the last budget of her tenure – even though her budget office released a similar plan in February.

Rep. Cameron C. Staples, D-New Haven and co-chairman of the Finance, Revenue and Bonding Committee, responded that unless Rell offers a plan she will support in place of the threatened bill, he will ask the panel to consider recommending a second income tax hike on Connecticut’s wealthier households.

“The governor would veto the proposal that came out of the finance committee, but recognizes that a plan has to be developed,” read a statement released late Thursday by Rell’s office. “Other options must be looked at and agreement between both sides of the aisle and the governor must be reached.”

Rell infuriated Staples and the finance committee’s other co-chair, Sen. Eileen M. Daily, D-Westbrook, on Tuesday when she called the plan their panel adopted “the least desirable for Connecticut’s beleaguered families.”

At issue is a $1.3 billion block of revenue built into the preliminary $18.93 billion budget adopted last September for 2010-11.

Rather than employing further tax hikes or spending cuts, legislators and Rell decided to meet that target by securitizing, or selling future revenues at a discount in exchange for cash now.

The Rell administration, working with state Treasurer Denise L. Nappier, was directed to identify potential revenue sources, and presented the finance panel with six in a Feb. 3 report.

One of those six involved extending expiring surcharges on the monthly bills of United Illuminating and Connecticut Light and Power Co. customers for another decade. It specifically involved maintaining 37 percent of the surcharge customers have paid since 2000 to reimburse utilities for costs tied to a state-ordered deregulation process.

But instead of reimbursing the utilities, which will finish recovering their costs by 2013, the surcharge will go to the state.

That extension would amount to $150 million per year, or $1.5 billion over the next decade. It would be combined with $300 million state government would raid from energy conservation funds, which also are supported by consumer surcharges, and the entire $1.8 billion package would be offered to investors willing to pay $1.3 billion now.

The finance committee largely followed that plan, but rather than touch energy conservation programs, the group decided to maintain 56 percent of the utility surcharges to raise the $1.8 billion over the next decade.

The statement issued Thursday by Rell’s office said “the governor didn’t like the stranded cost option in February and she doesn’t like it now. She thinks it’s a terribly unfair option and she believes it’s incredibly regressive. Most importantly it’s unfair to ratepayers who were told that the stranded costs would come off their bills after 10 years.”

The governor’s fellow Republicans in the legislature have been urging her to veto the plan, which they called a “hidden tax.”

The administration has not said why the utility option was included in the report from her budget office, given Rell’s objections. “They were options, not recommendations,” the governor’s statement read.

Staples said Thursday that Rell’s answer isn’t sufficient.

“Since the governor is rejecting her own securitization plan and the legislature is not favorably inclined toward securitization anyway, the ball is firmly in her court to offer an alternative,” he said.

If no securitization plan is adopted, the 2010-11 budget, which the nonpartisan Office of Fiscal Analysis already is projecting to be $725.7 million in deficit, could be more than $2 billion out of balance.

And given that OFA is projecting a much larger, $3.88 billion shortfall for 2011-12, Rell – who is not seeking re-election – potentially could hand off combined deficits approaching $6 billion before her terms ends in early January.

Rather than allow that to happen, Staples said he would ask the finance committee to propose another income tax increase on wealthy households. The budget adopted last September raised the top rate from 5 to 6.5 percent on annual income above $500,000 for individuals and $1 million for couples.

The administration notes that Rell did not sign last summer’s budget bill. But she also did not veto it, instead allowing it to become law without her signature. Staples and other Democratic leaders also have noted repeatedly that the governor’s budget office negotiated the spending plan that was adopted with them.

The legislature also wasn’t the only group to propose selling future revenues for pennies on the dollar. Just two weeks before the budgeted last September, Rell had offered a new budget proposal that called for state government to raise $1.2 billion by securitizing a future revenue stream.

“Securitization was a part of nearly every budget plan offered by all parties last year,” the governor’s Thursday statement read. “No one really wanted to pursue securitization, but there was no choice because agreement could not be reached on the spending cuts needed to avoid securitization.”

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Keith M. PhaneufState Budget Reporter

Keith has spent most of his 31 years as a reporter specializing in state government finances, analyzing such topics as income tax equity, waste in government and the complex funding systems behind Connecticut’s transportation and social services networks. He has been the state finances reporter at CT Mirror since it launched in 2010. Prior to joining CT Mirror Keith was State Capitol bureau chief for The Journal Inquirer of Manchester, a reporter for the Day of New London, and a former contributing writer to The New York Times. Keith is a graduate of and a former journalism instructor at the University of Connecticut.

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