Panel proposes borrowing to avoid tax on power plants
A key legislative panel adopted plans Tuesday to end a controversial tax on power plants this summer — but the lawmakers would finance it with borrowing and by delaying other debt costs that would be paid off after the November 2014 elections.
Majority Democrats on the Finance, Revenue and Bonding Committee defended the borrowing, arguing that it helps end a tax that threatens to raise electric rates. But Republicans countered that it’s a gimmick to hide ongoing state fiscal problems from the voters — for now.
“All in all, I believe it is a very responsible bill,” said Sen. Andrea L. Stillman, D-Waterford, who co-chairs the general bonding subcommittee on the finance panel.
”I believe it is a very responsible bill,” said Sen. Andrea L. Stillman, D-Waterford.
“It really is pushing it down the road again,” said Rep. Vincent J. Candelora, R- North Branford. “And if our economy doesn’t turn around, we’re sort of prolonging the tough decisions.”
Stillman, whose district includes the two nuclear power plants on Millstone Point in Waterford, was one of more than a dozen lawmakers who recently protested Gov. Dannel P. Malloy’s proposal to extend an electricity generation tax set to expire June 30.
Malloy, who is facing a projected $1.2 billion shortfall — about 6 percent of annual operating expenses — in the next fiscal year, is proposing continuing several tax increases otherwise set to end to help close that gap.
But Stillman and others argued that power plants, which set their energy sale costs through long-term contracts, likely would pass the added cost to ratepayers in a state that already has some of the highest rates in the nation.
Dominion Resources of Richmond, Va., which owns the Millstone plants and paid more than $40 million of the $70 million tax raised this fiscal year, has been scaling back its generation capabilities in the Northeast. And some lawmakers fear that extending the tax could lead Dominion to sell or even attempt to shut down the Waterford facilities.
The problem for Democrats on the Finance panel, though is that they didn’t want to raise other taxes to replace the $70 million. And the legislature’s Appropriations Committee is expected later this week to recommend at least as much spending for next year as Malloy proposed in a February plan that relied on the generation tax remaining in place.
The committee’s solution was to piggyback the cost of dropping the generation tax onto another controversial Malloy initiative.
Because state government has struggled periodically over the last two years to find the cash to pay its bills, the governor proposed borrowing $750 million, and refinancing a $1 billion operating debt amassed in 2009 under Gov. M. Jodi Rell.
Republicans criticized Malloy’s plan because it defers repayment of much of the interest from these moves — about $217 million — until the fiscal year that begins July 1, 2015.
The finance committee plan increases post-election costs even more.
It delays another $152 million in total debt payments and related expenses due over the next two years until after mid-2015, and increases the interest owed after the next election by $14 million.
“It is astonishing to me that the finance committee could take a fiscally irresponsible budget proposal from Governor Malloy and make it even worse,” Senate Minority Leader John P. McKinney, R-Fairfield, said afterward. “You would never teach your children to manage debt by paying credit cards off with credit cards, but that’s exactly what the state of Connecticut is doing and, eventually, we’re going to expect our children to pick up the tab. This is a poor start to the legislative budget process and I implore Democratic leaders to revisit this mistake. I will not support any budget that employs such irresponsible gimmicks.”
Office of Policy and Management Secretary Benjamin Barnes said afterward that the finance committee had adopted a financing package that “largely supports the governor priorities.”
But Barnes added he would wait to assess the panel’s proposal regarding the generation tax until it finishes its work on other revenue bills for the next budget on Monday.
“We all understand it is a work in progress and are confident we can work towards a mutually acceptable bond package as part of an overall agreement on the budget and revenue in the coming weeks,” he said.
Kevin Hennessy, director of government affairs for Dominion’s New England region, said committee leaders Tuesday “created a path forward toward keeping a promise” and ending the tax as planned. “They’re showing they care that electric rates don’t go up unnecessarily.”
Bonding for UConn
In other business Tuesday, the finance panel also endorsed $1.7 billion in new bonding for the University of Connecticut to build new science and engineering facilities and dorms to accommodate a drastic increase in enrollment.
“By making the investments … we will take steps to regain our standing as a leader in innovation and make our state an attractive place to invest, work and do business,” Malloy wrote in a statement released after the meeting.
The plan, which House Speaker J. Brendan Sharkey, D-Hamden, and Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, both support, also involves a second bill pending before the Appropriations Committee.
That measure involves spending $17.4 million in the 2014-15 fiscal year to begin a 10-year hiring program that eventually would add 259 new faculty and 158 guidance counselors for UConn.
Last week, business leaders from across the state came to the state Capitol to show their support for the initiative.
“The breadth of business support is amazing. We’re all backing this initiative,” said Joseph McGee, vice president for public policy for the Business Council of Fairfield County.
But the House chairwoman of the Appropriations Committee has expressed doubts about the proposal, asking where the money for UConn would come from.
“We have things in this budget we have to cut to give you $17.4 million, really painful things,” Rep. Toni Walker, D-New Haven, told UConn President Susan Herbst last month.
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