With the latest partisan wounds from Connecticut’s ongoing budget impasse still fresh, both parties steeled themselves this week to push again for a bipartisan budget that could avert several fiscal nightmares.
But whether legislators and Gov. Dannel P. Malloy can prevent a Hartford bankruptcy, further bond rating downgrades, emergency municipal tax increases, and the loss of huge federal dollars could hinge on political rhetoric.
Or more precisely, it could hinge on whether that rhetoric can be set aside.
Can Republicans stop claiming their plan wouldn’t raise taxes when nonpartisan analysts report more than $800 million in revenue from tax and fee hikes?
Can Democrats accept GOP spending and bonding caps that clamp down much harder than anything Democrats want to consider?
With the partisan margins in the House and Senate smaller than ever, could a bipartisan route be Connecticut’s only path to a new budget?
“What is it going to take to come to a bipartisan budget?” House Speaker Joe Aresimowicz, D-Berlin, told The Mirror last week. “For people to start telling the truth.”
But Senate Republican leader Len Fasano said open-mindedness and mutual respect are no less important than forthrightness.
Democratic leaders “felt they could ignore some of the things we say and still move forward with their own ideas. And I think there is a waking up in this building that those days have gone. And I think that’s healthy for the state of Connecticut.”
Republican budget increases taxes
When Republicans stunned the Capitol on Sept. 15 and 16, guiding their budget through the Senate and House while securing eight Democratic votes in the process, Republican lawmakers wasted no time touting their biggest selling point.
Sen. Len Suzio, R-Meriden, hammered home the point in an email to constituents, urging them to press Malloy to sign a budget with “NO NEW TAXES.”
Sen. Heather Somers, R-Groton, issued a release touting “a common-sense budget that doesn’t raise taxes on the hard-working families of our state.”
Within the first four days of the votes, The Mirror had obtained 16 press releases, social media posts — and one video — from Republican lawmakers touting a budget that does not raise taxes.
Even during the House budget debate last month, Rep. Chris Davis of Ellington, ranking GOP representative on the tax-writing Finance, Revenue and Bonding Committee, dismissed the idea that the Republicans were raising taxes.
“Let’s be very particular about where these new revenues are derived from,” Davis said. “They’re certainly not derived from tax increases.”
But according to the fiscal note attached to the Republican plan by the legislature’s nonpartisan analysts, that budget raises taxes by $344 million per year, $688 million over the two-year budget cycle — on hospitals.
Anticipating this objection, House Minority Leader Themis Klarides, R-Derby, said during the budget debate that, “We all define taxes in a different way.”
Republicans said the hospital tax doesn’t count, since the industry would receive every penny back — and more — from the state. The back-and-forth arrangement is part of a larger plan to leverage more federal aid.
But in 2011, when Malloy proposed the same type of arrangement — and made the same claim that this wasn’t a tax hike — Republican lawmakers universally rejected it.
In fact, they continue to count the 2011 hospital tax — worth $350 million per year — when they decry the $1.9 billion overall state tax hike ordered six years ago as the largest in state history.
Nonpartisan staff say another key revenue-raiser in the GOP plan would reduce income tax credits for the working poor, reducing tax refunds to those households by a total of $153 million across two years.
But many Republicans argue this is more like a spending cut — reducing a social service benefit — than a tax hike. That’s because many recipients of this tax credit have no income tax liability, yet still receive the refund.
And the projected tax-and-fee increase in the Republican plan also doesn’t include a series of previously approved insurance industry and business tax cuts the GOP would eliminate before they can be implemented.
Those measures will deny companies $51 million in tax relief over the two fiscal years. Republicans consistently have labeled those tax-break cancelations as tax hikes when offered by the Democratic governor or Democratic legislators.
The Republican budget also would eliminate $52 million in payments the state makes to cities and towns with high property tax rates to help them cap taxes on motor vehicles. The GOP budget also removes the cap — which would restore local taxes on vehicles to higher rates in those communities.
Democrats have said this amounts to a municipal property tax hike imposed by the Republican budget.
When pressed on these points, many Republicans note that the Democratic budget, according to nonpartisan analysts, would raise more than $1.5 billion in new revenue from tax and fee hikes over the biennium.
But that Democratic total the GOP cites includes the $688 million hospital tax levy — which Republican lawmakers insist is not a tax hike.
Senate Republican leader Len Fasano said he believes Republicans are far more conservative when it comes to tax and fee hikes than Democrats have been.
But when asked whether Republicans should drop the no-tax-hike message on the grounds it isn’t accurate, Fasano said, “I would argue, yes. In purity language, yes.”
Senate President Pro Tem Martin M. Looney, D-New Haven, said the no-tax-hike claim was “glaringly false,” involving a budget that takes $153 million out of poor households.
“Republicans are purposefully misleading the press and the public,” said Looney, one of the legislature’s leading advocates for the income tax credit for the working poor. “It’s that simple.”
Aresimowicz said watching television news coverage of the mid-September budget debate that led with the no-tax-hike claim was infuriating to himself and other Democrats who’ve offered much deeper cuts to local aid, health care and social services than they would like.
“I turned on the TV and I nearly lost my mind,” he said. “We all have to be honest with the public.”
GOP: Dems must accept structural change
But Republicans say Democrats fall far short of the honesty standard when it comes to their professed commitment to contain surging debt costs in the coming years.
Rep. Melissa Ziobron of East Haddam, ranking GOP representative on the Appropriations Committee, is one of the leading advocates for a much stronger state spending cap — one that brings retirement benefit costs and all municipal aid back under some limits.
Ziobron said Democrats have taunted Republicans over the latter’s repeated call for structural change. And while Democrats resist GOP proposals for tough-but-necessary caps on spending and borrowing off camera, they profess in media interviews to be fiscal conservatives, she said.
“It makes me more than frustrated,” she said. “I spent the entire summer working on a spending cap commission. At the end of the day that commission couldn’t agree on a path forward. Republicans wanted a much stricter cap than Democrats did, so we’ve incorporated that into our budget.”
Ziobron added that, “We’ve tried to encapsulate everything,” adding that, as she’s heard Democrats say their plan complies with the existing spending cap, “I frankly was sick about it because they want to exclude everything.”
Over the last few years new interpretations of the spending cap have excluded retirement benefit debt.
Further complicating matters, Attorney General George Jepsen offered an opinion in November 2015 that the cap carries no legal authority because of the legislature’s failure to formally implement the system after voters added a cap requirement to the state Constitution in 1992.
Three moderate Democratic senators — Joan Hartley of Waterbury, Paul Doyle of Wethersfield and Gayle Slossberg of Milford — all backed the Republican budget in the mid-September vote.
The three moderates developed a package of fiscal reforms earlier this summer and asked Democratic legislative leadership to embrace it.
Some of the reforms sought by the trio would restrict in statute benefits the state could offer in future contracts. Others would end automatic cost-of-living adjustments to pensions, remove overtime earnings from pensions calculations, and restrict future benefits contracts with state employee unions to no more than four years in duration.
The moderates also would peg contract arbitration awards to the state’s ability to pay increased wages and benefits and create a commission to develop a sustainability plan for the pension fund for municipal teachers.
But during the budget debate last month, the moderate Democrats found more of those reforms in the Republican budget than in the plan crafted by Malloy and Democratic legislative leaders.
“I think they [moderate Senate Democrats] think like we think, which is to get control of the long-term debt,” Fasano said, adding that Democratic leaders also have for years dismissed Republicans ideas too quickly because Democrats held large majorities.
But now they hold a narrow 79-72 edge in the House, and the 36-member Senate is split evenly along partisan lines.
“I think before they listened to us, they listened to the words, but didn’t feel they had to incorporate some of our ideas,” Fasano said. “Perhaps they are going to be more sensitive to the issues we bring up at the table.”
Malloy told reporters this week that he’s urged all sides to recommit themselves toward reaching a bipartisan deal. And that means considering all concepts, including those that may have been dismissed in the past.
“I think everyone in the room realizes we need to get a budget, and we need to get it sooner rather than later,” he said.