House, Senate Democrats unable to agree on provisional budget

mark pazniokas / ctmirror.org file photo

House Speaker Joe Aresimowicz, D-Berlin

Connecticut’s prospects of enacting a state budget — even a provisional one — before the new fiscal year begins July 1 appeared to slip away late Monday night as House and Senate Democrats were unable to agree on a path forward.

After closed-door talks between House and Senate Democrats bogged down over several issues tied to a new two-year budget deal, including a potential sales tax hike and labor concessions, House Speaker Joe Aresimowicz of Berlin notified his fellow Democrats they should not expect to vote on a provisional budget Thursday.

The speaker had asked Democrats, who hold a slim 79-72 edge in the House, to hold open Thursday for a possible budget vote.

Aresimowicz refused to discuss details of the negotiations, but he confirmed Tuesday that he doesn’t anticipate a budget vote at this time.

Republican leaders already have said they want to focus only on a full budget, and not on any stopgap measure.

“Short of both chambers and both political parties willingness to sit down and seriously negotiate a compromise budget for the state, convening a House session Thursday will do nothing to move us forward,” Aresimowicz said Tuesday. “This is the reality of a Senate where responsibility is shared equally between the parties combined with a tight House margin. Without everyone participating in good faith, and leaving behind the political blame game, it appears the Governor will be running the state by executive order for the foreseeable future.”

Aresimowicz said he still has asked House Democrats to come to the Capitol on Thursday to discuss budget issues in caucus.

Arielle Levin Becker / CTMirror.org

Senate President Pro Tem Martin M. Looney, D-New Haven

Senate President Pro Tem Martin M. Looney, D-New Haven, said he would prefer that legislators vote on the provisional plan that Gov. Dannel P. Malloy proposed this week to mitigate the cuts key programs would face after July 1.

“I am prepared to sign an emergency certified bill today calling the Senate into session on Thursday, June 29 to vote on the proposed ‘mini budget’ for the first quarter of the fiscal year,” Looney wrote in his statement. “… No one wants the governor to run the state by executive order. I am disappointed by these developments and hope that the Speaker reconsiders his position.”

“Everybody knows that the mini-budget would be better than executive order,” the governor said Tuesday. “Quite frankly, in most other states, people would be falling over themselves not to have the governor do what I would otherwise have to do. So it’s kind of perplexing.”

But Aresimowicz said not all Democrats are on the same page about which programs are vital and need to be protected — not just for the three months a mini-budget would cover, but for the next two fiscal years.

“I will continue to fight for and work toward a budget we can all live with,” the speaker said. “… I would rather get it right than get it done in some artificial timeline.”

Aresimowicz said he and the House Democratic leaders on the budget committees would continue to negotiate with other lawmakers and work on a new two-year budget.

The speaker added he would continue backing a provisional budget if those ongoing talks at least produce “the groundwork, the parameters, the foundation to what could be a two-year biennial budget that moves the state of Connecticut forward.”

And if the other three caucuses won’t work toward that goal?

“It’s going to be a long, ugly year,” Aresimowicz said.

Democratic and Republican legislators and Malloy have been at loggerheads over how to close that potential gap, though all sides say they want to minimize tax hikes, given the state authorized major increases in 2011 and 2015.

Talks between Democratic and Republican legislators effectively have broken down over two issues:

The GOP only is willing to consider minimal tax hikes to close the projected shortfall, and also opposes the concessions deal proposed by Malloy and state employee union leaders. That deal is projected to save $1.57 billion over the next two fiscal years — and $24.1 billion over the next two decades. It calls for three years of wage freezes, plus increased employee contributions toward health and retirement benefits.

But it also would extend the state’s benefits program from mid-2022 until mid-2027.

That extension is a source of disagreement because — even if the proposed changes are made — Connecticut still would require future generations of taxpayers to cover a significant portion of the costs of retirement benefits promised to present-day workers. The agreement also would prohibit the state from laying off most workers for the next four fiscal years.

Meanwhile, Senate and House Republican leaders both suggested that legislators vote on their respective budget proposals for the next two fiscal years. But the two GOP caucuses also have not found common ground.

GOP isn’t united on one budget plan either

Keith M. Phaneuf / CTMirror.org

Senate Republican leader Len Fasano of North Haven

“Inaction is just not what we should be doing. It is inexcusable,” Senate Republican leader Len Fasano of North Haven said, warning that the poor, the disabled, and others would suffer “dramatically” if Malloy must run the state after July 1 absent a new budget or even a provisional plan.

Fasano urged lawmakers to vote on the two-year proposal Senate Republicans offered on May 16.

The plan relies on close to $2 billion in labor savings to be achieved through legislative changes to collective bargaining rules rather than labor concessions.

But Fasano’s plan also swept $160 million from an energy conservation fund fueled by a surcharge on consumer electric bills. Even though he later cut that proposed sweep in half, House Republicans still oppose the $80 million transfer.

And House Minority Leader Themis Klarides, R-Derby, said that concern remains very real.

“I don’t think it should be cut at all,” she said. “Ratepayers are paying into this fund and that fund is supposed to be used for conversation measures. … I believe in the fund but I also believe people are giving that money to be spent in a certain way and sweeping it is not something I feel comfortable with.”

Keith M. Phaneuf / CTMirror.org

House Minority Leader Themis Klarides, R-Derby

Klarides said she agrees with Fasano that many will suffer if no new budget is in place by Saturday. “If you operate by executive order, you are doing bare bones.”

Klarides suggested lawmakers adopt the House Republican’s two-year budget, which also legislates collective bargaining changes but eliminates a revenue-sharing plan with cities and towns and as well as most of the state’s income tax credit for working poor households.

Fasano said he believes a compromise still could be reached between the competing Republican plans. “We’re open to suggestions,” he said. “This is not cast in stone.”

Analysts say state finances, unless adjusted, would run $2.3 billion in deficit in the fiscal year that begins Saturday, and $2.8 billion in the red in 2018-18.

Democrats have nominal control of the General Assembly.

The Senate is evenly split, with Lt. Gov. Nancy Wyman, a Democrat, able to cast tie-breaking votes. Given that and the narrow margin in the House, Democrats could craft a budget on their own, but all lawmakers and the governor would have to be prepared to reach compromise on many sticky issues.

And according to sources close to Monday’s negotiations, some moderate Democrats remain wary of proposals to boost the sales tax rate from 6.35 percent to either 6.75 percent or 6.99 percent.

A rate increase and a possible elimination of some sales tax exemptions would be used to mitigate municipal aid reductions that have been proposed to help close the big projected deficits in the next two fiscal years.

Sources also said some Democrats share the GOP’s concerns about the proposed concessions deal.

Malloy asked legislators Monday to consider approving nearly $320 million in revenue increases to mitigate the massive cuts he would be forced to impose if Connecticut enters the new fiscal year Saturday without a budget.

Even if those steps are taken, Malloy outlined deep cuts to municipal aid, social services, hospitals, and public colleges and universities that would occur if he had to run the upcoming fiscal year by executive order.

“Connecticut can and will adopt a responsible, balanced budget for the coming biennium – the question is how best to handle our finances until that happens,” the governor said Monday. “I am prepared to operate government in the absence of a budget, but it has never been my preference to do so.”

Drawing from proposals in separate budget plans offered by Democratic and Republican legislative leaders, as well as from his own, the governor proposed $317.5 million in new revenue be authorized now — even though a full budget plan for the fiscal year starting July 1 still is being negotiated.

The governor said those revenues would be used chiefly to mitigate cuts he would be forced to make to social services and to municipal aid.

Malloy’s recommendations include:

  • $68.3 million in additional income tax revenues raised by restricting a property tax credit to households with dependents and by freezing a tax credit for working-poor families.
  • $60 million to be raised by a tax amnesty program covering income, sales, corporation and other taxes.
  • $26.4 million from capping various business tax credits.
  • $5.0 million from increasing various license and permit fees and fines.
  • And $137.3 million in one-time funds to be swept from various off-budget accounts.

Republican leaders made it clear Monday they would not vote for any provisional revenue plan.

“We feel very strongly that what this state needs is a budget,” Fasano said. “Perhaps doing mini-budgets just prolongs the inevitable, which is just coming back here and talking and trying to get it worked out.”

But Fasano changed his position one day later and said Tuesday that he was leaning toward supporting a provisional budget to avoid the cuts that would come after July 1.

Klarides said Monday that the budget-by-executive-order option and the alternative — the same plan modified by modest revenue increases – aren’t that much different.

“Instead of complete tornadoes and hurricanes and cyclones going through the state of Connecticut, it’ll just be tornadoes and hurricanes. Right?” she said. “So it’s a better version of a bad-case scenario. I appreciate him making that effort.”

Klarides did not change her position Tuesday and still wants legislators to focus on adopting a two-year budget.

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