House leaders won’t block GOP bid to limit Hartford bailout

Keith M. Phaneuf / CTMirror.org file photo

House Speaker Joe Aresimowicz, D-Berlin, left, and Majority Leader Matt Ritter, D-Hartford

One day after Connecticut approved a five-year fiscal recovery plan for Hartford, House Democratic leaders said they wouldn’t block a Republican proposal to effectively end the state bailout of the capital city after the upcoming fiscal year.

House Speaker Joe Aresimowicz, D-Berlin, and Majority Leader Matt Ritter, D-Hartford, also said they don’t believe the GOP-sponsored restrictions would be binding — but tolerating them might be necessary to secure a new state budget deal and preserve vital programs.

“We will work through it,” Ritter told Capitol reporters during a mid-morning press conference before Friday’s House session. “And I don’t take it personally.”

“The reality is this legislature cannot bind future legislatures — that’s the law of the land, and it’s actually a pretty good law,” Aresimowicz said.

As far as the Republican-proposed restrictions on future aid to Hartford, the speaker added that, “If that makes people sleep better at night and it doesn’t take too much time — fine.”

With the session set to end at midnight Wednesday, and both chambers split narrowly on partisan lines, there still is no deal on a revised state budget for the fiscal year that begins July 1. And the stakes are big.

Unless both parties reach a bipartisan compromise, the state would:

  • Impose big cuts to prescription drug aid for poor seniors and the disabled.
  • Preserve and possibly deepen cuts in grants to cities and towns.
  • And open the door to billions of dollars in canceled transportation projects, higher transit fares and reduced summer and fall rail service.

And in the midst of all that is a debt assistance agreement reached between the city and the state earlier this spring to keep Hartford out of bankruptcy.

Under the deal, signed by Gov. Dannel P. Malloy’s administration and by state Treasurer Denise L. Nappier, the state will pay off the entire principal on Hartford’s general obligation debt, about $534 million, over the next two or three decades — as well as an undetermined amount of interest. The total will depend on how the city’s debt is renegotiated with bondholders.

That’s expected to amount to annual debt assistance of about $40 million per year over that 20- to 30-year period.

Many legislators, from both parties, say this agreement exceeded the emergency assistance the General Assembly authorized when they adopted a new state budget last October.

Malloy and Nappier both say the agreement complies with the authorizing language and that some lawmakers simply don’t understand what they voted for.

Critics say the legislature only authorized two things:

  • About $40 million in annual assistance for this fiscal year and next.
  • And that the state would guarantee the refinancing of Hartford’s debt. That could leave Connecticut on the hook to pay more in the future, but only if Hartford defaulted on its payments.

GOP lawmakers have proposed language for the next state budget designed to effectively neutralize the debt assistance after the 2018-19 fiscal year.

Keith M. Phaneuf / CTMirror.org

House Minority Leader Themis Klarides and Senate Republican leader Len Fasano (file photo)

“I appreciate Joe and Matt’s comments,” Senate Republican leader Len Fasano of North Haven said. “Our caucus wants Hartford to succeed, but if it looks like Hartford can’t, we have to be able change this” emergency debt assistance plan.

“We’re trying to hold to the original deal,” Fasano added.

“It was only supposed to be a two-year lifeline for Hartford,” said House Minority Leader Themis Klarides, R-Derby. Aresimowicz and Ritter’s position Friday “is appropriate since this is what we all agreed to.”

The Republican proposal, which has been filed as an amendment to several bills with fiscal implications, is to reduce traditional municipal grants to Hartford each year, starting in the 2019-2020 fiscal year, by an amount equal to the debt aid the city receives in the same year.

But what’s to stop the 2019 legislature from simply adopting a budget that overrides this directive? All it takes to change one law is another law. Is this an election-year GOP talking point and little more?

“Great argument,” Aresimowic replied, adding that state assistance for Hartford in the years to come will be determined by those elected down the road.

“It’s up to whoever happens to be sitting in that chamber here,” he said, pointing to the Hall of the House, “sitting in the (Senate) chamber upstairs, and signing (bills) in the governor’s office.”

“I understand where (Republican leaders) are coming from, and the last thing I want to do is be an obstructionist,” Ritter said, adding many GOP lawmakers “were very supportive of Hartford in its time of need.”

But Ritter also said he understands that his fellow legislators from Hartford might have a hard time with the Republican measure.

“I take offense to it,” Rep. Brandon McGee, D-Hartford, said Thursday. “I understand additional dollars coming to Hartford will have an impact on other districts. But we were all elected to come here to help our individual districts.”

McGee noted that the state recently pledged tens of millions of dollars in loans, tax breaks and other assistance to help one of southeastern Connecticut’s largest employers, General Dynamics Electric Boat shipyard in Groton, ramp up for increased submarine production.

Sen. John Fonfara, D-Hartford, said he was working on a compromise that would recommend restricting aid to Hartford — after the five-year recovery plan has been completed.

Hartford Mayor Luke Bronin proposed the city’s first budget under the recovery plan last month.

The $567.3 million plan technically increases spending by 1.4 percent, or $8.1 million, beyond projected city expenditures for the current fiscal year.

Keith M. Phaneuf / CTMirror.org

Hartford Mayor Luke Bronin, left, confers with Hartford Democratic Sens. Douglas McCrory, center, and John Fonfara.

But it also includes a new initiative to save millions of dollars over the next five years by paying $20 million in cash for capital improvement projects — which typically are financed outside of the budget. About $10.5 million for the capital program would come from the operating budget and another $9.5 million from off-budget sources.

If those new cash payments are not counted, the plan cuts spending by about one-half of 1 percent, or $2.3 million, below current spending levels.

The budget is balanced without any one-time revenues, without any asset sales, and without deferring pension obligations, according to the administration. It does not include any new borrowing.

Malloy spokeswoman Kelly Donnelly said the administration would analyze the Republican proposal in greater detail if and when it is called for a vote.

But she added the timing is poor.

“The city, recently on the brink of bankruptcy, now looks forward to five years of balanced budgets and a brighter future,” Donnelly said. “What is particularly offensive about Senator Fasano’s amendment is that he understands completely that he cannot tie the hands of future legislatures and that, in effect, his proposal is fully unenforceable. The fact is, the only conceivable purpose of putting forward a bill like this is to devise an opportunity to degrade and disparage the people of our capital city—those who are putting in the hard work that is required of them.”

Fasano said he hopes the city averts bankruptcy, but added the five-year recovery plan sets very ambitious targets when it comes to closing projected city budget shortfalls.

“It’s a tough target to reach,” he said.

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