After a day filled with intense, last-minute negotiations, Democrats on the General Assembly’s Appropriations Committee appeared poised late Monday to bring the expenditure portion of a new, two-year spending budget to a vote Tuesday.
Full details were not available late Monday, but the package, according to sources would:
- Position the legislature to scrap the controversial shift of more than $400 million in teachers’ pension contributions onto cities and towns. This would be done through a combination of alternative spending reductions and revenue enhancements, the latter to be identified by the Finance, Revenue and Bonding Committee.
- Rely on ongoing talks between Gov. Dannel P. Malloy and state employee unions to produce concessions worth $1.57 billion over the next two fiscal years combined — the same savings target the governor employed in his own budget.
- Maintain the exemption for nonprofit hospitals’ real property from municipal taxation.
- And redistribute education aid from wealthy communities to poorer ones in a much more gradual fashion, over several years, than the shift proposed by the governor.
It was unclear late Monday whether the proposal would require tax increases to be in balance.
But the committee, which must complete its work by the close of business Thursday, is expected to rely on some one-time revenues, including reserves stripped from the financially imperiled Special Transportation Fund, to help balance its proposal.
The legislature’s Finance, Revenue and Bonding Committee is working to complete a revenue plan for the next two fiscal years and must complete its work by the end of the week.
Democratic leaders on the Appropriations Committee were scheduled to present the plan to members in a closed-door caucus Tuesday morning and hold a vote later in the day.
Both budget-writing committees face a daunting task that has gotten more challenging in recent days.
Surging retirement benefit costs, declining tax revenues, and strong political pressure from both parties to avoid tax increases threaten funding for key priorities including municipal aid, education, health care and social services.
Both the legislature’s nonpartisan Office of Fiscal Analysis and Malloy’s administration have warned for months that state finances, unless adjusted, will run billions of dollars in deficit over the next two fiscal years.
OFA pegged the potential shortfall at $1.4 billion for next fiscal year and $1.6 billion in 2018-19.
The administration estimates deficits of $1.7 billion and $1.9 billion, respectively.
And things appeared poised Monday to get significantly worse.
Although analysts don’t complete their review of income tax receipts until April 30, new projections Monday found collections running $267 million below the level anticipated in the current budget for this month.
April income tax returns are crucial because they also are one of the prime factors used to project likely tax revenues for the next two fiscal years.
If the early returns hold, and if April receipts are down 20 percent or $267 million, that probably would prompt analysts to reduce expected revenues for each of the next two fiscal years by a similar amount, or more than $500 million for the upcoming biennium.
That would expand the worst-case deficit forecast from the Malloy administration to nearly $2 billion in 2017-18 and $2.2 billion in 2018-19.
These represent potential gaps of 10 percent and 11 percent, respectively.
The Appropriations and Finance, Revenue and Bonding committees each have six Democratic senators and six Republicans. And the Democratic margin among representatives is just one: 21-20 on Appropriations and 20-19 on Finance.
Check back later today for updates.