With a dozen legislators surrounding him, Gov. Dannel P. Malloy signed into law today a $40.1 billion biennial budget that remains incomplete unless his administration negotiates up to $1 billion in labor savings in coming days.
Malloy sat down at a desk in the ornate Old Judiciary room to sign a record tax increase he has sold as vital to stabilizing state finances, but he and legislators face a far tougher task if his talks with labor do not end well.
“My administration is working hard with the remaining parties, that is our fellow state employees,” Malloy said.
The governor has demanded labor savings worth $1 billion in each of the next two fiscal years, but improving revenue estimates have lessened pressure on him and the unions to deliver that much.
Malloy’s formal bill signing was held one day after the Senate and House approved the budget, sending the tax-and-spending plan to the governor nearly two months before the start of the fiscal year.
The governor and leaders were happy to note that they exceeded the expectations of many at the Capitol who feared that resolving a deficit of at least $3.2 billion might spill into the summer.
But they were aware that the budget relies on a broad array of tax increases that residents will notice in their paychecks, on their tax returns and in retail checkout lines. Among other things, it raises the sales tax for the first time in 20 years, a boost from 6 percent to 6.35 percent.
“While it is an accomplishment,” Malloy said, “this is not a time to celebrate in a traditional sense, because we are aware this budget requires sacrifices on just about anyone who lives in the state of Connecticut.”
Malloy told a business group last week he would lay off 5,000 employees if the talks fail. Today, he told newspaper editors and editorial writers in the morning and reporters in the afternoon he would impose no less than 4,000 layoffs if necessary.
“I will do everything in my power to reach reasonable agreements with the work force of the state of Connecticut,” Malloy said.
By the estimates of his own budget office, the most layoffs would save is $100 million annually for each 1,000 positions eliminated, with the first-year savings reduced by accrued sick and vacation time that would become immediately payable.
“Everything is on table” was the governor’s answer when asked where he would obtain the remaining savings if the labor talks break down.
“Everything” includes state aid to municipalities, which Malloy has largely protected from cuts in the budget signed today. But at $3 billion a year, it would be an obvious place for some cuts.
“Connecticut cannot afford a ‘Plan B’ filled with layoffs, cuts in vital public services, and cuts to towns and cities that would only make things worse for everyone,” said Larry Dorman, spokesman for the coalition of state employee unions negotiating with the administration. “We will continue to do whatever we can to be part of a fair solution.”
Dorman said that $1 billion in labor savings is too high for a work force of little more than 50,000, representing about $20,000 per employee. But the administration has said that not all labor savings they are seeking would come from wages and benefits.
“It’s not fair or realistic to expect middle-class people who happen to work for the state to each cut $22,000 a year from our family annual budgets, especially when we, like all middle class families, are already paying 10 percent of our income in state and local taxes, while millionaires are only paying 5 percent of their income, and some of our largest corporations are paying little or no taxes at all,” he said.
Republicans, meanwhile, continued to describe the approved budget as nothing to celebrate.
“With the stroke of a pen, Governor Malloy has signed into law the most expensive budget and most expansive tax increase in Connecticut history,” said Senate Minority Leader John P. McKinney, R-Fairfield. “What’s worse is that the governor’s $40 billion two-year budget is still $2 billion out of balance.”
Malloy has promised that the budget will be balanced, one way or another, before the fiscal year begins on July 1.