Rell promises to offer proposal for borrowing against future income
Gov. M. Jodi Rell pledged Wednesday to offer a new plan to help balance the next state budget by selling close to $1.8 billion in future revenues at a discount in exchange for $1.3 billion now.
And this plan, according to the governor, would be one she would sign into law.
That distinction is important to leaders of the legislature’s Finance, Revenue and Bonding Committee, who bristled last week after Rell pledged to veto a committee securitization bill that was based on an option presented just two months ago by her own budget staff.
“Governor Rell is working on a new securitization plan and – when it is ready – she will share it with legislative leaders and the public,” Rell spokesman Rich Harris said.
The administration plan will avoid selling any revenues that currently support state operating costs, Harris said, because doing that would cause future budget problems. Other than that, Rell’s office would not disclose any details of the plan under development.
Ironically, the only proposal offered to date that has raised enough revenue to meet the $1.3 billion target while also steering clear of existing budget revenues is the very plan Rell threatened to veto.
“I’m encouraged that the governor intends to present a new plan,” Rep. Cameron C. Staples, D-New Haven, co-chairman of the finance committee, said Wednesday. “But I still think she should take another look at the bill we passed. I think this is the only way that makes sense.”
That bill adopted in committee last week would extend soon-to-expire surcharges on the monthly bills of United Illuminating and Connecticut Light and Power Co. customers for another decade. Customers have paid the surcharges since 2000 to reimburse utilities for costs related to state-ordered deregulation.
The committee wants to maintain 56 percent of the surcharge even after the utilities have been paid off.
That extension would raise an average of $180 million per year, or $1.8 billion over the next decade. State government would sell the rights to that revenue stream to any investor willing to provide $1.3 billion now.
Based on an average monthly customer usage of 700 kilowatt hours, this would cost about $5 per month for an average residential customer. About 6 percent of Connecticut’s electricity customers, who are served by municipal utilities, would not be affected under this plan.
Rell’s fellow Republicans in the legislature quickly denounced this as a “hidden tax” and CL&P’s parent company, Northeast Utilities, launched a radio, newspaper and Internet advertising campaign this week urging consumers to fight the plan.
“I cannot state more clearly that this assault on our customers is unacceptable,” CL&P President Jeff Butler said. “To require only a portion of Connecticut residents to pay what amounts to a $180 million a year tax for 10 years, or any amount for that matter, to close a statewide budget gap is shortsighted and bad public policy. We plan to fight vigorously on behalf of our customers and will communicate the dangers of this hidden tax to the public.”
NU spokeswoman Tanya Meck said the utility hasn’t decided yet how long the campaign would continue, and though she said the ads are being paid for by NU shareholders, and not with ratepayer funds, she declined to discuss how much has been spent.
Though he opposes the utility securitization option, Sen. Andrew W. Roraback of Goshen, the ranking Republican senator on the finance committee, agreed Rell should offer some proposal to ensure the 2010-11 budget, which already faces a projected $725.7 million deficit, does not find itself more than $2 billion out of balance.
“The governor should advance ideas that would solve this $1.3 billion problem,” he said. “She can sit on the sidelines or she can advocate for something that is painful and unpopular.”
The finance committee’s other co-chair, Sen. Eileen M. Daily, D-New Haven, said she would review any new proposal from the Rell administration, but hopes the governor would reconsider her pledge to veto the committee bill if it reaches her desk.
Daily noted that less than three months ago, Rell’s budget agency, the Office of Policy and Management, co-authored a report that included a very similar proposal. Under that scenario, about $1.5 billion of the $1.8 billion burden would fall on ratepayers, with the remaining $300 million coming from energy conservation programs – which are also fueled by surcharges on consumer bills.
Daily and Staples sent the governor a letter Wednesday urging her to pick a securitization proposal and stand behind it.
Both the governor and the Democrat-controlled legislature proposed budgets last summer that relied on more than $1 billion to be raised by selling future revenues at a discount. The budget adopted by the legislature, which Rell did not veto but allowed to become law without her signature, set the $1.3 billion target and directed the governor and state Treasurer Denise L. Nappier to outline a series of options.
That report, delivered to the finance committee on Feb. 3, outlined five revenue-raising options besides retaining utility surcharges, but simultaneously criticized those five alternatives.
Installing highway tolls may lack political support and wasn’t researched in detail. Selling either state buildings and other physical assets or revenues tied to a 1998 lawsuit settlement reached with the tobacco industry won’t raise enough revenue to plug the full $1.3 billion gap. And offering up mainstream revenue sources, such as income or sales tax receipts, for a lump sum now only would increase deficits projected for future budgets.
A fifth proposal to sell gaming dollars relied in part on receipts from a new Keno game, which failed to gain legislative support. It also relied on leveraging existing lottery revenues.
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