Spending cap gives senators leverage over state budget debate

For the next few weeks, each of 22 Democrats in the state Senate is a king or a queen — at least when it comes to the budget.

And as Gov. Dannel P. Malloy seeks lawmakers’ approval to rewrite the rules of constitutional spending cap, it’s becoming clear that keeping all of those senators happy isn’t easy.

For some, extending an expiring tax on power plants is an obstacle. For others, any type of tax increase is a problem.

Several urban senators are more concerned about whether Connecticut is spending enough, particularly on its social services.

“Every budget negotiations presents its own set of unique challenges,” Mark Ojakian, Malloy’s chief of staff, said Tuesday. “But the ultimate goal for the governor remains unchanged — a balanced budget that continues investing in public education and job creation without raising taxes.”

Malloy’s goals for the $43.8 billion, two-year budget he offered in February hinge upon changing the rules of the spending cap. 

The new exemptions the governor proposed involve:

• State spending in the first year of any federal program;
• And certain payments into the teachers’ and state employees’ pension funds.

The governor’s budget — which maintains overall aid levels to cities and towns while meeting surging demand for social services — would otherwise exceed the cap by $466 million next fiscal year, and by $691 million in 2014-15, according to the legislature’s nonpartisan Office of Fiscal Analysis.

The 1991 General Assembly tried to temper outrage over enactment of the state income tax by drafting a statutory spending cap. Voters would add the cap requirement to the state Constitution one year later by adopting the 28th Amendment.

The cap is supposed to keep spending increases in line with the annual growth in personal income or inflation. But if the governor and legislature agree, they can change the rules or exceed the cap legally.

Malloy’s predecessor, Gov. M. Jodi Rell, took advantage of the latter option twice.

Rell, a Republican, cooperated with Democratic-controlled legislatures to approve a $244 million exception to the spending cap before the 2005-06 fiscal year began to spend additional federal aid for nursing homes.

And in the 2007-09 biennial budget, Rell and lawmakers gave permission to exceed the cap by $497 million in the first year, and by $691 million in the second. That was done to accommodate major increases in municipal education grants to towns and in payments to health care providers who treat Medicaid patients.

But neither rule changes nor cap exceptions can happen unless 60 percent of the legislature approves.

In the 151-member House, that means 91 votes. Malloy’s fellow Democrats control 98 of those seats, giving the administration a small margin for error.

But in the 36-member Senate, the governor can’t lose even one of 22 Democratic votes and secure the rule changes needed to implement his budget.

Republicans in both chambers have made it clear they won’t support the new cap definition.

Once cap rules have changed, Malloy will only need a bare majority in each chamber to get a budget passed.

That means Democratic lawmakers — and particularly senators — have their most leverage over the budget while the spending cap remains unresolved.

So while the administration is asking lawmakers to endorse the new cap rules, senators are preserving their leverage and waiting to see first how the budget negotiations come together.

“I’m doing my due diligence on the budget right now,” said Sen. Paul Doyle, D-Wethersfield.

“To me it is entirely illogical to talk about them in separate silos,” said Sen. Joan Hartley, D-Waterbury, referring to the budget and the spending cap.

Doyle, a moderate Democrat who supported the $1.5 billion tax increase Malloy sought in 2011 to help close the historic deficit he inherited, said he’s pleased the governor is trying to steer clear of taxes this time around. But he’s also watching to see how the final budget talks shake out before he decides on the spending cap.

“I voted two years ago to raise taxes, and I’m not comfortable doing it again,” he said. “Everything’s on the table, but I wouldn’t be comfortable doing it again.”

Sen. Andrea L. Stillman, D-Waterford, faces a different problem.

Malloy is seeking to raise $70 million next year by extending a tax on power plants that otherwise would expire.

“Like every gubernatorial proposal, you look at it, you digest it and you consider all sides of it,” she said.

But Stillman’s district includes the two nuclear power plants on Millstone Point that are owned and operated by Dominion Resources, based in Richmond, Va. That company is paying about $42 million of the $70 million the tax is projected to raise this year.

And she is one of a dozen southeastern Connecticut lawmakers who noted earlier this session that Dominion has been scaling back its generation capabilities in the Northeast in areas where potential earnings are shrinking.

It sold a coal-powered plant in Salem, Mass., last August and is trying to sell another coal-burning facility in Brayton Point, Mass.

The company also announced in October that it intended to shut down a nuclear plant in Kewaunee, Wisc., next year for economic reasons.

Dominion officials also have said that continuing the tax would lead to higher electricity rates.

The Millstone plant employs 1,300 people, and Stillman said that as she weighs new spending cap rules, she must consider these jobs as well.

“I am vehemently opposed to extending the generation tax on utilities because I believe it will have an adverse impact on the state of Connecticut,” Stillman said. “I have to take that seriously.”

Hartley, also a moderate, said she’s not entirely convinced the cap system needs to change right now, adding she first wants officials to pore over the budget one more time in search of spending cuts.

“Sometimes there’s a lot of small stuff they can find that can add up to something bigger,” Hartley said. “I want to make sure we have looked at everything that is not a priority.”

But Sen. Toni Harp, D-New Haven, who represents one of the state’s poorest cities, said tax increases aren’t the only thing that could undermine a budget deal.

Harp, who is co-chairwoman of the Appropriations Committee and therefore involved in final budget negotiations, has warned against further cuts to health care and social services, arguing that would significantly harm Connecticut’s most vulnerable residents.

The Senate Democratic Caucus presented members with a memo recently outlining deep potential new cuts to municipal aid, higher education and hospitals, if the cap changes are not approved.

“The situation we’re in right now empowers a small group of people,” Harp said. “This is a problem that takes multiple steps (to solve) and is very complex.”