Updated at 1 a.m. Wednesday
Democratic legislators ended a tense day of negotiations with the governor Tuesday by announcing a deal on a new state budget that the General Assembly will race to adopt Wednesday before the constitutional adjournment deadline of midnight.
Passage will require the cooperation of the Republican minority, an uncertain prospect after House Speaker J. Brendan Sharkey, D-Hamden, and Senate Minority Leader Len Fasano, R-North Haven, exchanged insults outside the Capitol pressroom.
Sharkey and Senate President Pro Tem Martin M. Looney, D-New Haven, largely glossed over the spending cuts necessary to balance the budget, focusing instead on positive aspects: No tax increases, more money for transportation funding and revenue-sharing with towns, albeit at lesser amounts than originally planned. It also avoids tapping Connecticut’s emergency reserve.
Each said he has the votes for passage in the House and Senate. While the leaders said the goal was to pass the budget and implementing legislation Wednesday, legislative staff was making preparations for a one-day special session early next week to conclude work.
The leaders said the package would close a nearly $1 billion gap in the fiscal year that begins July 1, but the line-by-line details would not be available until Wednesday.
The plan imposes deep cuts on salary accounts in most state departments and commissions that probably would require Gov. Dannel P. Malloy to reduce the state workforce beyond the nearly 2,600 jobs his administration is striving to eliminate through layoffs, retirements and attrition. It also funds hospitals and public colleges and universities above the levels recommended by the governor and maintains public financing for state election campaigns.
The deal, confirmed by Malloy’s office, also scraps a controversial deferral of business tax credits and a proposed expansion of the bottle deposit program. It consolidates six longstanding legislative commissions that advocate for ethnic minorities and other demographic groups into two offices.
“This is a budget that represents true structural change,” Sharkey said, adding the package cuts about $830 million in spending from the preliminary $20.4 billion budget adopted last June for 2016-17.
But Looney said that the plan also relies on some temporary revenues and other one-time budget solutions that would help balance the books next fiscal year, but wouldn’t reduce a $2.2 billion plus shortfall in the 2017-18 fiscal year.
“This is a budget that doesn’t raise taxes and is built almost entirely on long-term spending reductions, which will help keep expenditures under control in the future,” said Devon Puglia, the governor’s spokesman. “Our goal has been to do things differently this year, to ensure that – just like the households we represent – we do not spend money that we don’t have. If and when the legislature passes this budget, we look forward to signing it.”
In successive appearances in the Capitol pressroom, with lobbyists crowding inside the door in hopes of overhearing details, Democratic and Republican legislative leaders began framing the budget debate in the context of the campaign for control of the General Assembly in November.
Sharkey repeatedly contrasted the Democratic plan with the GOP version, saying it does a better job of protecting core functions of government. He and Fasano exchanged angry words as the Democrats left and the Senate GOP leader arrived.
“Maybe they feel threatened by us. I don’t know. And I understand why they feel threatened,” Fasano said. “They have screwed up this state so badly, I understand they are very nervous about November. I get that.”
The GOP could block passage, forcing the Democrats to return in special session. Fasano declined to say if the minority would allow a vote.
“I’m not going to prejudge anything. I want to see what we’re looking at. Their budget could look like my budget, our budget,” Fasano said. “This budget could look like a Republican budget. I’m not going to prejudge it.”
House Minority Leader Themis Klarides, R-Derby, said she could not say if the House GOP would allow passage until she can review the budget.
“I can’t say what’s going to go on or not unless I see a budget. How do I know if I like it or if I don’t like it?” Klarides said, saying her caucus and the Democratic rank and file are owed an opportunity to study the budget and have “a reasonable debate.”
“I’m not talking about blowing this up,” she said. “I’m not talking about a filibuster, but a reasonable debate.”
Revenue-sharing, transportation, grows more modestly
The Democratic plan cuts about $50 million from a revenue-sharing program that had called for sending almost $245 million in sales tax receipts to cities and towns.
Democratic legislators, who adopted the revenue-sharing plan last June and are expected to campaign on the program this fall, resisted proposals to cut more deeply both from Malloy and from Republican legislators.
Another portion of sales tax receipts was dedicated last summer to Malloy’s initiative to expand transportation investment. Details of the budget in this area were not available, but legislators said a planned funding increase of $130 million was reduced by about $50 million.
The governor, who has pressed hard in recent days for Democratic legislators to embrace permanent spending cuts and to reduce their reliance on temporary budget fixes, had volunteered to support a cut to his big initiative if they would consider additional reductions.
“We are reforming government for the long-term,” Senate Majority Leader Bob Duff, D-Norwalk, said. “We are working to help the middle class in this state. We are helping to grow jobs in this state and look to the long-term.”
“We do have substantial property tax relief for municipalities,” Looney added.
The new budget would reduce the Education Cost Sharing grant to cities and towns by $32.1 million from the preliminary 2016-17 budget adopted last June. But the cut is not as severe as the $41.7 million reduction recommended by the Appropriations Committee.
More state layoffs needed?
Resources for hospitals, social services and higher education have fallen considerably in recent years, but Sharkey said Democrats — while unable to reverse all damage — were able to fund these programs at levels higher than Malloy recommended.
The strategy behind this budget was to trim spending in most line items rather than impose deep cuts “so as to do the least amount of damage (and) protect the programs that we care about. … The cuts that have been realized are real cuts that provide the structural change we have been looking for in this new economy.”
But this strategy included a number of small cuts that add up in a big way — at least in one segment of the budget.
Though full details weren’t available, Sen. Beth Bye, D-West Hartford, co-chair of the Appropriations Committee, confirmed that this budget — similar to proposals from Malloy and from GOP legislators — probably reduces funding for agency and departmental salary accounts by hundreds of millions of dollars.
These cuts probably require more personnel savings than Malloy will be able to achieve through workforce reduction efforts currently underway.
The administration began serving layoff notices last month, and the governor said he expects about 1,900 to 2,000 workers will have received pink slips by mid-June.
The administration also expects to eliminate roughly 600 more jobs through retirements and attrition.
Bye said the budget also “sends signals” to state employee unions about another key area in which legislators hope to curb spending in the future: health care and retirement benefits.
The budget includes changes to reduce costs in these areas among non-union staff. Worker unions, which granted concessions in 2009 and 2011, would have to agree to reopen contracts before benefits could be changed. And union leaders refused to do so this spring, urging Malloy and legislators to consider tax increases on wealthy households and major corporations.
Further scaling back government
Reducing personnel costs are not the only way the new budget would streamline government, Democratic legislators said.
The six legislative panels that advocate for various constituency groups would be consolidated into two. They are:
- The Permanent Commission on the Status of Women;
- The Commission on Children;
- The Commission on Aging;
- The African-American Affairs Commission;
- The Latino and Puerto Rican Affairs Commission;
- And the Asian Pacific American Affairs Commission.
Support operations for the legislature’s Program Review and Investigations Committee also would be reduced.
The staff of the Permanent Commission on the Status of Women used its official web site to lobby against the consolidation, suggesting it fed into a national “war on women.”
In a letter to the governor and legislative leaders, the commission’s executive director, Carolyn Treiss, wrote: “When nationally there is an undeniable war on women, does Connecticut really want to follow suit, or do we want our state to remain in the vanguard of national legislation on women’s rights?”
Other commissions also posted statements urging supporters to fight for their preservation. The African-American Affairs Commission said the legislature was marginalizing issues of importance to blacks.
“The elimination of AAAC tells the African-American community that their issues are not important to the State,” the commission said on its web site. “The message that resonates is that despite the successful efforts of the past to eliminate the disparities that exist for this constituency in education, health, economic development, criminal justice and incarceration, and social well-being have become marginalized.”
Meeting the governor’s fiscal conditions
The new budget complies with several fiscal conditions Malloy set besides avoiding any tax or fee increases.
Looney and Sharkey said the plan does not transfer any funds from Connecticut’s $406 million emergency reserve. Commonly known as the rainy day fund, much of the reserve may be needed to balance the current fiscal year, which closes on June 30.
State Comptroller Kevin P. Lembo reported this week that current-year finances are $259 million in deficit, and the legislature’s nonpartisan analysts confirmed a similar shortfall at $280 million.
The governor also had balked at a controversial Democratic legislative proposal to entice corporations to forfeit some of their tax credits next spring in exchange for a larger tax break two years down the road. The governor said last Friday this was tantamount to borrowing, and estimated it would cost Connecticut millions of dollars in the long run.
Democrats also agreed to drop a proposal to expand Connecticut’s bottle deposit program, which was expected to raise $11 million.
And a proposed $27 million sweep of energy efficiency funds raised through the Regional Greenhouse Gas Initiative would be scaled back to $3.5 million.