CROMWELL — Gov. Dannel P. Malloy has made it no secret he believes state government is top heavy.

But the new governor, who will deliver his first biennial budget proposal in four weeks, said Wednesday that state government needs to shrink at all levels.

Addressing the annual meeting of the Connecticut Council of Small Towns, Malloy told more than 300 municipal leaders gathered at the Crowne Plaza Hotel that his administration will follow their example as it grapples with a $3.67 billion budget deficit.

“Every one of you has squeezed out greater efficiency in your departments,” Malloy said  in his 30-minute speech, the first time a governor has addressed the coalition representing 120 small towns in six years. “You have found a way to do more with less.”

The Stamford Democrat, who served as mayor for 14 years through 2009, stressed repeatedly during the gubernatorial campaign the need to reduce mid- and top-level management in state government, and to give more responsibility to rank-and-file employees. And Malloy didn’t deviate from that position on Wednesday.

“We still need to restructure government,” he said, adding that “it probably means we have too many managers.”

But Malloy, who has to close a projected deficit for 2011-12 that equals nearly one-fifth of current spending, said he expects his budget proposal will begin a process that ultimately will downsize all of state government.

Malloy said throughout the campaign that he doesn’t believe layoffs are necessary and the new governor never mentioned that option once during his speech.

And while he added he’s not excited about the prospect of eliminating jobs — through any method — state government has to start getting by with less.

“I’m not anxious to do it. That’s not something that drives me,” he said. “On the other hand we’ve got to get to the point where we’re creating efficiencies.”

Fielding questions from reporters afterward, Malloy said he reduced the overall size of Stamford’s government during his 14-year tenure, adding that he sees a similar opportunity to downsize state government at all workforce levels. “I see it everywhere,” he said.

Malloy added that while he believes most state government waste and inefficiency can be traced back to excessive and ineffective management, once that problem is corrected, it might then make it easier to find where the workforce could shrink at other levels besides management and remain as efficient.

“I would hope that much of that could be carried out over time,” he said.

Malloy enjoyed strong support from unions representing state government’s more than 40,000 unionized employees.

And State Employees Bargaining Agent Coalition spokesman Eric Bailey said Wednesday that public workers are understandably wary of talk of “downsizing,” coming off the heels of a 2009 incentive program that led 3,800 veteran state workers to retire.

“Everybody realizes that it’s going to take a lot of effort and working together to solve the budget deficit,” Bailey said. “But there are still departments that… have never come back to the staffing levels they used to be at” before retirement incentive programs in 2003 and 2009. In some agencies, he said, “we’re just barely covering the bases now.”

Bailey added that one of the key solutions unions are watching for in the Malloy budget proposal is a more graduated state income tax that asks wealthy households to pay more. “It really comes back to fixing our revenue structure,” he said.

Malloy has said he’s willing to consider a more progressive income tax, though Connecticut also needs to maintain the “substantial advantage” it holds in terms of upper-income rates compared with neighboring states like New Jersey, New York and Massachusetts.

COST executive director Bart Russell said municipal leaders appreciated “the spirit of state and local partnership” Malloy emphasized in his speech, adding that no one expected the new governor — given the deficit — to promise much fiscal assistance. “I think it’s very clear to everyone we will be facing some tough budget options.”

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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