The Senate closed the book Tuesday on the next state budget, approving a final package of adjustments that plugged a $400 million hole, canceled a controversial utility bill surcharge, and effectively granted advance approval to a $1.6 billion union concession deal.

The budget policy bill, which now heads to Gov. Dannel P. Malloy, also would repeal a cabaret tax, restructure fare increases on the Metro-North commuter rail line, and implements a host of tax changes.

The governor, who negotiated the bill with his fellow Democrats in the legislative majority, is expected to sign the measure, which cleared the Senate in a 20-16 vote largely along party lines.

The new budget for the coming biennium now totals $40.54 billion, including a $20.14 billion component for the fiscal year that begins July 1 and $20.4 billion for 2012-13.

The built-in deficit for the first year, which was projected as high as $3.67 billion shortly before Malloy took office in January, was closed with $1.52 billion in new state taxes and fees, $800 million in revenue growth, and spending that totals $1.36 billion less than the level originally projected to maintain current services.

Next year’s bottom line, though well below initial projections, is $860 million above this year’s spending, an increase of almost 4.5 percent, according to a fiscal note from legislative analysts. And that number could jump higher if the state’s more than 45,000 unionized employees reject the tentative concession deal.

Though Malloy campaigned on a pledge to solve the deficit with “shared sacrifice,” that principle has become skewed through a plan that used new revenues to close about two-thirds of the original deficit, said Sen. Robert J. Kane of Watertown, who warned it won’t help Connecticut’s economy to recover.

“My constituents are telling me: ‘Cut spending, don’t raise taxes,’” said Kane, ranking GOP senator on the Appropriations Committee. “This proposal is far from perfect–far from good actually, because it’s not real. It’s all based on assumptions and hypotheticals and sooner or later this is going to come to light.”

But Senate Majority Leader Martin M. Looney, D-New Haven, said, “This was the responsible approach. If we would have relied more on cuts we wouldn’t have been able to avoid municipal aid [reductions], and we would have ended up placing more burdens on property taxpayers.”

The last in a series of omnibus policy bills needed to implement the new biennial budget, the bill adopted Tuesday closed a $400 million hole that developed after the tentative concession deal was announced last month.

Malloy and the legislature originally built $2 billion in biennial savings tied to that deal into  the budget, but had to amend it after the administration announced the tentative package was worth $1.6 billion — $700 million in 2011-12 and $900 million in 2012-13.

That gap was filled without tax hikes and relatively few spending cuts. Instead, the governor the legislature opted to scale back large surpluses already built into two annual spending plans, which still are designed to run in the black by $89 million next year and $555 million in 2012-13.

If labor unions, which are expected to finish their ratification votes before late June, ultimately approve the concessions, the legislature might not come back into special session to ratify the agreement.

That’s because the budget policy bill includes language stating that if the unions approve the agreement and if no session is scheduled within five days or by June 30–whichever comes first–then the labor deal is deemed to have legislative ratification as well.

Sen. L. Scott Frantz, R-Greenwich, noted that Malloy proposed back in February ending this longstanding legislative practice of allowing contract awards and changes to be ratified by default. “Now we go back to the same old business-as-usual approach,” he said.

A GOP amendment to delay any legislative action until after any union ratification was rejected in a party line vote.

Senate Minority Leader John P. McKinney, R-Fairfield, said Democratic legislators were shirking their responsibility by trying to avoid a ratification vote later this month, yet predicted they still would complain about the high cost of state employee union contracts once back in their home districts. “If I had a dollar for every time I heard that I could solve this budget,” he said.

“We’re not saying we’re not going to call ourselves in” for a special session, Sen. Toni R. Harp, D-New Haven, co-chairwoman of the Appropriations Committee, said, adding that if the legislature opts not to vote on the union deal later this summer, that wouldn’t be unusual. “That is not (always) what is done in the state of Connecticut,” she said. “We approve things a lot by not taking them up.”

Frantz and other Republicans also questioned the pre-ratification clause given Monday’s disclosure that the legislature’s nonpartisan Office of Fiscal Analysis reported it could not vouch for more than $1 billion of the $1.6 billion in assumed labor deal savings because of unanswered questions or insufficient data supplied by the Malloy administration.

The budget policy bill also cancels a controversial surcharge on residential and business utility bills of Connecticut Light & Power Co. customers starting July 1, but doesn’t return about $40 million collected from consumers to date.

That’s because a combination of surging tax revenues and some unanticipated savings have made $647 million in borrowing originally planned to support this year’s budget no longer necessary, according to Malloy and Comptroller Kevin P. Lembo.

The $40 million raised since January came from a surcharge of 0.379 cents per kilowatt hour–or $2.65 per month for the typical residential customer using 700 kilowatt hours per month.

A second surcharge, this time equal to 0.47 cents per kilowatt hour – or $3.29 per month for the typical residential customer–was scheduled to replace the current surcharge in July.

Other components of the bill would:

  • Reschedule fare increases on the Metro North line including a 1.25 percent increase in Jan. 1, and 1 percent increases each Jan. 1 from 2013 through 2018.
  • Cancel a new 3 percent cabaret tax that was approved last month and slated to begin July 1. The levy would have applied to admissions, food, drink, service and merchandise at any place offering live music, dancing or other entertainment in addition to serving alcoholic drinks.
  • Carve out a last-minute exemption from the new tax hike on electricity generation, a 0.25 percent per kilowatt levy expected to raise $72 million annually. Resource recovery facilities that burn solid waste would not have to pay the increase.
  • Though a new tax hike on tobacco products raises the levy from 27.5 to 50 percent of the price, this bill caps the tax on cigars at 50 cents each.
  • Institute the so-called “Amazon law” tax by requiring online retailers whose in-state affiliates sell more than $2,000 worth of goods annually in Connecticut to collect state sales tax and remit it to the Department of Revenue Services.
  • Eliminate the Transportation Strategy Board, which was created in 2001 to assist with the legislature in setting transportation planning priorities.
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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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