Republican legislators sent their first state budget proposal to the governor’s desk in decades early Saturday morning, capping a strange day that didn’t move Connecticut any closer to a new fiscal plan, but raised new questions about the balance of power at the Capitol.
Gov. Dannel P. Malloy already had pledged to veto the GOP budget hours before it cleared the House by a 77-73 vote shortly before 3:15 a.m.
Meanwhile, leaders from both parties left the Capitol resigned to resume bipartisan talks in hopes of reaching a deal before a series of fiscal calamities strike in two weeks.
‘We are in this room’
House Minority Leader Themis Klarides, R-Derby, said Republican caucuses that have felt overlooked in too many budget debates in recent history, have a key role to play in crafting that final agreement.
“We are in this room because we love this state and we want to make it better,” she said, noting the Republican plan drew endorsements from municipal advocates and the state Realtors’ association. “There is a reason people have endorsed this. This is going to be moving Connecticut forward.”
Nine hours before the House debate ended, Republicans scored their first win shortly before 5 p.m. Friday when three moderate Democrats joined with all 18 GOP members of the Senate to pass the plan there by a 21-15 margin.
And despite Malloy’s veto threat, five Democratic representatives teamed up with all 72 Republicans in the House early Saturday to send the measure to his desk.
Democrats, who hold a 79-72 edge in the House, didn’t have to call the bill. But House Speaker Joe Aresimowicz, D-Berlin, said it was important to give the Republican plan a vote — but then move on and craft a budget that lawmakers from both parties and the governor all can agree upon.
The budget standoff “has to end for the state of Connecticut,” Aresimowicz told Capitol reporters before the House debate began. “It’s our hope that we can enter into true bipartisan discussions with no lines in the sand starting as soon as Monday.”
But while the speaker added that, “We’ve got to get serious; we’ve got to stop this silliness,” House Democrats still had a little mischief left up their sleeve.
Once it became clear that Republicans had enough Democratic support to pass the budget, House Democratic leadership called seven amendments to alter the bill.
If any of the proposed changes — which included increasing funding for higher education, restoring a youth reading program, and others — had passed, the bill would have gone back to the Senate for reconsideration, rather than to Malloy’s desk.
GOP representatives and their Democratic allies defeated all of the amendments.
Klarides said her party still remains ready to sit down with Democrats and find a bipartisan solution to Connecticut’s budget crisis.
“It’s sad for this state that we have to wait until Sept. 15th, 141 days since we put (the first GOP) budget out, to have the speaker of the House take us seriously,” she said.
“We still have a deadline looming; we really have to work this out,” said House Majority Leader Matt Ritter, D-Hartford.
Largely because of surging retirement benefit and debt costs — which are fixed by contract — and declining income tax receipts, state finances, unless adjusted, would run $1.6 billion in deficit this fiscal year.
Absent a budget, Malloy has said he must cut hundreds of millions of dollars from municipal aid grants that are due out in two weeks.
Further complicating matters, a vital plan to raise hospital taxes to leverage more federal aid for Connecticut — which Malloy, Democratic and Republican legislators and the hospital industry all have endorsed — would be in jeopardy if not enacted by Oct. 1.
That’s because it hinges, in part, on retroactively raising Medicaid rates paid to hospitals back to July 1. That plan must be adopted and receive federal approval before the federal fiscal year ends on Sept. 30.
Malloy also urged Democrats and Republican legislators to come together and work with his office.
“My door remains open, and I remain ready to work with all sides,” the governor said. “We know our financial problems will get significantly worse in October, resulting in massive cuts to towns, hospitals, private providers, and others. Connecticut is counting on us – let’s keep working.”
GOP: Lean spending has bipartisan appeal
Republicans said their two-year, $40.68 billion budget, holds the line in spending, which makes it an attractive template on which to build a bipartisan compromise budget.
It establishes strong caps on appropriations and borrowing, Republicans said, while sparing communities from major cuts in state aid and from the governor’s proposal to shift $280 million in teacher pension costs onto local budgets.
On paper, General Fund spending would increase 3.5 percent in the first year and another 0.6 percent in the second, despite surging retirement benefit and debt costs fixed by contract.
But like the Democratic plan, the GOP budget’s growth is inflated by a major new tax increase on hospitals, which also calls for the state to return all of those funds and more to the industry. This is done to capture hundreds of millions in new federal aid as both the state and the hospital come out ahead.
Back out the spending tied to that hospital plan and growth in the first year of the GOP budget is a little under one-half of 1 percent.
Rep. Lonnie Reed of Branford, one of five Democrats to back the Republican plan, said none of the proposals she has seen have pleasant choices.
“I hate this (Republican) amendment and I hate our amendment and I hate the governor’s bill,” she said. “And I think most of us feel this way.”
But Reed added that the GOP’s focus on limiting spending growth over the long haul is a step in the right direction.
“We’re doing harm to our state and it has to stop,” said Rep. John Hampton, D-Simsbury, who also backed the GOP plan.
Other Democratic representatives to endorse the plan were Daniel Rovero of Killingly, Patrick Boyd of Pomfret, and Kim Rose of Milford.
“I voted for this budget with a heavy heart,” Rovero said, adding Democrats nonetheless have to work harder to cut spending. “I want this to go to the governor and — if it gets vetoed — we can all sit down and work together on something that will be great for Connecticut.”
But the Republican plan also came under fire from many Democrats because of several spending cuts.
Hartford, higher ed lose in GOP plan
House Majority Leader Matt Ritter, D-Hartford, said before the House debate began he was disappointed that the Republican budget also includes less than one-fifth of the extra funds Hartford Mayor Luke Bronin has said he needs to keep the capital city out of bankruptcy this fall.
Bronin asked for an additional $40 million this fiscal year while the GOP plan adds $7 million in Education Cost Sharing funds.
“I was very surprised they didn’t take care of that situation,” he added. “I thought they would.”
Bronin said that, “The Republican budget … would make bankruptcy the only path available to Hartford.”
Rep. Greg Haddad, D-Mansfield, noted that the GOP budget would cut a total of $75 million from the operating funds for the University of Connecticut, the state university system and the community colleges in the first year of the two-year plan. And the funding would fall to $125 million below last fiscal year’s level by 2018-19.
“These are unprecedented cuts in our higher education system,” Haddam said, “a system we depend on to create future generations of workers for the state of Connecticut.”
Dems: GOP attacks clean elections, labor
“I think the reality of this bill is it opens up a floodgate of corporate money, of special interest money,” Rep. Matt Lesser, D-Middletown, said of a proposal to raid $35 million from the Citizens Election Fund.
The Republican budget incorporates savings from the concessions deal unions and Malloy struck earlier this year, as does the compromise plan reached by the governor and Democratic leaders.
But while that concessions deal also locks the state employees’ benefits package into place through 2027, Republicans said Connecticut can save even more money now by limiting the pension benefits offered after that date.
Those new limits would reduce required pension payments by $144 million this fiscal year and by $177 million in 2018-19.
Many Democratic leaders and union leaders also have questioned whether the state can make these changes unilaterally or whether that would violate collective bargaining rules.
Malloy said it would “violate existing state contracts with our employees, resulting in costly legal battles for years to come.”
“This budget attempts to take away our freedom to negotiate our health care and our retirement security,” said Lori J. Pelletier, president of the Connecticut AFL-CIO. “While our critical public service workers gave back billions of dollars to help shore up the state’s finances, the Republicans not only demanded more blood, they refused to ask for anything from corporate CEOs and the ultra-wealthy.”
Tax hikes remain a delicate issue
After insisting for months they would propose no tax hikes to close major projected deficits in state finances, Republicans included tax and fee increases that raise $840 million across this fiscal year and next combined.
Rep. Jason Rojas, D-East Hartford, House chairman of the Finance, Revenue and Bonding Committee, engaged in a verbal fencing match with his Republican counterpart on that panel, finance ranking GOP member Chris Davis of Ellington.
Trying to get Davis to say the word “tax,” Rojas asked what policy the state would use to secure hundreds of millions of dollars in new federal Medicaid reimbursements.
“I believe it it generated through a hospital formula,” Davis said, finally acknowledging after being pressed by Rojas for clarification that “formula” actually involved raising the state “provider tax” on hospitals. By restoring those tax dollars to the industry — and sharing some of the federal funds as well — state government and the industry both would gain revenue through the arrangement.
The Republican budget also would raise more than $150 million over this fiscal year and next combined by slashing nearly 60 percent of tax relief the state provides to poor working families through its Earned Income Tax Credit.
But Republicans also noted they proposed about $700 million less in tax hikes than the compromise plan developed by Democratic legislative leaders and Malloy.