Another day of negotiations yields optimism, but no deal

The state’s long-running budget drama took a new twist Tuesday as some legislative leaders hinted they were closer than ever before to a bipartisan deal, absent any input from the Democratic administration of Gov. Dannel P. Malloy.

But House Speaker Joe Aresimowicz, D-Berlin, conceded that any bargain likely would include measures Malloy already has vetoed and labeled as gimmicks, and  House Minority Leader Themis Klarides, R-Derby, remained adamant her caucus wouldn’t accept any revenue increases beyond the more than $800 million it already has endorsed.

Lawmakers acknowledged that proposals to reduce payments into the state employees’ pension fund, boost teachers’ contribution toward their retirement plan, and direct Malloy to achieve massive savings after the next budget is in force all remain under consideration.

So is Connecticut on the cusp of a tentative solution to its nearly 15-week budget impasse?

“We’ve all moved in our positions and I think it is for the greater good of the state,” Aresimowicz said after Democratic and Republican legislative leaders wrapped 3 1/2 hours of closed-door budget talks. “And I really can’t see a way where we don’t come to an agreement.”

Since the middle of last week, though, top Democratic and Republican lawmakers have negotiated without representatives of Malloy, who vetoed a GOP budget passed with the assistance of three Democratic senators and five House Democrats. An override was not pursued last week.

To reach the two-thirds threshold necessary to override a gubernatorial veto, the Republicans would have had to win over another 24 Democrats in the House and three in the Senate.

The legislature has been sharply divided along partisan lines over how to close a projected shortfall of $3.5 billion in the upcoming biennium, and leaders said the talks were limited to force the two sides to find consensus. But the administration, which tracks finances on a daily basis, also can play a key role in these talks by assessing and trouble-shooting proposals that may not save or raise as much money as lawmakers envision.

To reconcile competing Democratic and Republican budget proposals, the speaker said, GOP ideas Malloy rejected once before likely must be brought before him a second time.

“They may be,” Aresimowicz said. “To get to a place where we are all comfortable — but none of us are absolutely happy — we’ve all given in various areas.”

Legislative leaders said they hope to be ready to brief Malloy on a common plan as early as Wednesday.

“I think the variable we don’t know is how discussions will go with the governor,” the speaker said. “That will be an additional layer of negotiations.”

The GOP-crafted budget vetoed by Malloy would have scaled back state employee pensions after the current benefits contract expires in mid-2027, but taken some of the savings now, reducing the actuarially required state contributions in the upcoming biennium by $321 million. Malloy says the move might not survive an inevitable court challenge by labor unions. He also called it irresponsible, given the failure of past administrations to adequately support pensions.

The administration also questioned the legality of a proposal to supplant some of the skyrocketing contributions the state must make into the teachers’ pensions with increased contributions from the employees.

Teachers can be required to contribute more. But the state’s ability to reduce its payments into the fund are limited, the administration says, by contractual pledges the state made to its bond investors when it borrowed $2 billion in 2008 to shore up the teacher pension fund.

The GOP plan also would have ordered the governor to achieve $260 million more in savings after the budget is in force by combining agencies and reducing executive appointments.

But the latter doesn’t involve close to that level of spending and governor’s authority to impose layoffs is greatly limited over the next four fiscal years by a deal that brought new union concessions.

Senate President Pro Tem Martin M. Looney, D-New Haven, acknowledged these GOP proposals are problematic for the governor, but said Malloy also has faced the unpleasant task of managing state finances by executive order absent a new budget.

And given the projected deficit, that has meant painful cuts to municipal aid, social services and other priorities not fixed by contractual obligations.

The governor “has expressed support ultimately for a conventional budget,” Looney said. “He has as great of a stake in getting to an agreed-upon budget that we can pass and that he will sign as we do.”

“We are eager to see details from leaders on where they’ve found compromise,” said Kelly Donnelly, a spokeswoman for the administration. “The governor has been very clear that our budget must be balanced with realistic spending cuts and not gimmicks or unachievable savings. We look forward to reviewing their ideas and finalizing a biennial budget in the days ahead.”

But it still was unclear late Tuesday whether the latest legislative talks even would result in a bipartisan proposal being presented to Malloy.

Both Klarides and Senate Republican leader Len Fasano of North Haven said tax hikes remain a sticky issue.

The Republican budget Malloy vetoed generated $840 million from tax and fee hikes across this fiscal year and next combined, and canceled another $50 million in previously approved tax cuts that haven’t been implemented yet.

And that’s not counting $95 million in new pension contributions from teachers — an increase from 6 to 8 percent of payroll — that would supplant payments state government otherwise would make.

The last proposal from Democrats generated about $1.53 billion from tax and fee hikes across two fiscal years combined.

So as Democratic and Republican legislative leaders seek consensus on a new budget, does that mean the GOP must consider more tax hikes?

“The tax hikes are a different situation,” Klarides said. “I still hold firmly on the tax hike issue, that we shouldn’t agree to any further tax hikes. We have to have the conversations that we have in that room. But we still feel strongly that tax increases do not move the state of Connecticut forward.”

Fasano also was cautious about promising any Senate Republican votes for a new budget that raises taxes and fees beyond the level in the early GOP plan.

“A budget is a total package, and we’re going to go in there and try to get the things we believe hard in,” Fasano said. “And at the end, my caucus will review the budget from top to bottom. … And my caucus will decide whether they can be in favor of that.”