After hearing for the past three months about “ugly” budget-balancing options like imposing surcharges on electric bills and raiding clean energy programs that sustain thousands of jobs, state legislators could be asked as early as today to approve them.

Sources said Gov. M. Jodi Rell and the legislature’s Democratic majority reached a tentative deal late Monday to balance the next state budget, including a borrowing plan to be financed with revenue from both controversial energy sources.

Neither legislative leaders nor administration negotiators would discuss the budget framework that was to be presented early today to majority Democratic caucuses in the House and Senate.

But House Majority Leader Denise W. Merrill, D-Mansfield, said that as long as the two branches work in tandem, the budget could be resolved before the regular session ends at midnight Wednesday.

“I think everybody recognizes we have to do a budget and they recognize that the choices are ugly,” said Merrill, who is to present proposals to House Democrats at a 10:30 a.m. closed-door caucus. “But if we can get a budget worked out with the governor, then we only need to get 76 votes.”

That figure represents the bare majority needed to adopt a budget in the 151-member House, rather than the difficult-to-achieve, two-thirds’ mark of 101 that would be needed there to override a Rell veto.

Democratic leaders in both chambers have said there is little chance of striking a deal without the Republican governor, given her opposition to tax hikes. That’s because while Democrats hold two-thirds of the 36 seats in the Senate, or 24, the last tax increase passed in that chamber, a series of rate hikes on the estate tax, drew only 21 Democratic votes, and none from the Republicans.

The preliminary $18.93 billion budget adopted last fall for 2010-11 hinged on securitizing, or selling the rights to, $1.8 billion in future state revenues over the next decade to any investors willing to pay $1.3 billion now. Over the past week, as state revenue forecasts have improved, the governor has insisted legislators reduce the amount government must securitize or borrow by at least $300 million.

Sources said the Democratic leaders and Rell used the surplus projected for this fiscal year, which stands at $105 million according to Comptroller Nancy Wyman, and about $140 million according to nonpartisan legislative analysts, to help meet that goal.

That securitization target was reduced further by a combination of spending cuts and raids on various special accounts and trusts outside of the budget’s General Fund. Though full details on the cuts weren’t available late Monday, sources said they extended emergency reductions Rell ordered this fiscal year in the departments of Correction and Children and Families, and other state agencies, into 2010-11.

The governor unveiled a plan last week to replace securitization with more traditional borrowing through the sale of general obligation bonds – to be repaid over seven years with state tax dollars – on Wall Street. To offset the $154 million in annual debt service tied to that bond issue, the governor proposed raising funds from three controversial sources:

  • A surcharge on electric bills, ranging between $2.37 and $3 per month, for most residential and business electricity customers, which would raise $74.5 million per year.
  • Raiding $54.5 annually from energy conservation funds.
  • And $25 million in new annual profits to be raised by turning operations of state-run Bradley International Airport in Windsor Locks to a quasi-public authority.

To date Democrats have resisted any effort to raid the energy conservation funds which clean energy advocates contend support thousands of private-sector jobs such as solar- and wind-powered home improvements and other energy efficiency projects.

But sources said that the compromise deal being presented to House and Senate Democrats today includes both a utility surcharge and energy fund raids, though it was unclear how much funding would be taken from each source.

Christopher Phelps, program director for Environment Connecticut, a clean energy advocacy group, predicted any budget bill that tapped the conservation funds would attract critics.

“There is strong bipartisan support for not raiding those funds, in both chambers,” he said. “Legislators recognize when you raid those funds, you’re eliminating jobs and you’re weakening programs that lower people’s energy bills.”

Rep. Vickie O. Nardello, D-Prospect, co-chairwoman of the legislature’s Energy and Technology Committee, agreed that conservation programs are very popular.

Nardello also warned that while the Democrat-controlled Finance, Revenue and Bonding Committee also had recommended retaining a portion of expiring surcharges on the monthly bills of Connecticut Light & Power Co. and United Illuminating Co. customers, rank-and-file Democrats are wary of imposing what critics have called a “hidden tax.”

“There’s a real concern for ratepayers bills,” said Nardello. “People understand that would be significant relief” if portions of these surcharges are not retained.

Sources said the proposal to re-organize administration of Bradley International Airport was uncertain, but a last-minute plan to revisit raising funds by offering a Keno-style lottery game was scrapped.

Instead, legislators were investigating complementing surcharges on private utility customers by imposing a new, temporary charge on about 72,000 electric consumers not served by CL&P or United Illuminating.

These customers, located in portions of Griswold, Groton, Bozrah, Franklin, Lebanon, Montville, North Branford, Norwalk, Norwich, Salem and Wallingford, are served by municipal utilities.

It was unclear late Monday what surcharge was under consideration for municipal customers.

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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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