Federation of Connecticut Taxpayer Organizations

HARTFORD � All that remains now is to await Gov. M. Jodi Rell�s veto and the resumption of long-delayed state budget negotiations.

That was the situation Friday after majority Democrats in the General Assembly finished approving their $35.71 billion budget for the next two fiscal years � a package that features $2.5 billion in tax and fee increases � while the Republican governor was simultaneously pledging to veto the measure.

The House of Representatives voted 91-58 to endorse the budget Friday, one day after the Senate passed it by a 19-16 margin. But while Democrats control 114 out of 151 seats in the House and 24 out of 36 in the Senate, they fell short of the two-thirds margin needed in both chambers to be able to override a gubernatorial veto.

And since Democratic lawmakers and the Republican governor�s staff haven�t had one fiscal discussion since June 1 � and remain far apart on the question of how much in new taxes can be raised � it appears almost certain state government will enter the new fiscal year on July 1 without an approved budget in place.

�While we look forward to the opportunity to meet with you in person to make the case for your support, if your intention is to veto this legislation, we hereby request immediate, bipartisan negotiations between the executive and legislative branches of government,� House Speaker Christopher G. Donovan, D-Meriden, and Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, wrote Friday to Rell in a letter released immediately after passage of the Democratic budget. �The people of Connecticut want us to resolve this unprecedented crisis.�

Rell spokesman Christopher Cooper said Friday the governor�s position had not changed. �The Democrats� budget goes in precisely the wrong direction at precisely the wrong time,� the governor said Thursday after the Senate vote. �This budget squanders a golden opportunity to reshape and reduce the size of state government. Instead, it maintains the bloat of bureaucracy that is already unaffordable.�

The new taxes would �rob our children of the opportunity we should be creating for them,� she added.

Equally important, Rell has said she is not prepared to discuss the state budget with Democrats until they show a greater willingness to consider deeper spending cuts.

Similarly, Democrats have been holding press conferences and other public events all across the state since the budget impasse began, trying to rally opposition to Rell�s no-tax-increase position. The governor�s budget includes deep cuts to social services, health care, and higher education, which Democrats argue would harm Connecticut�s children, elderly, poor, and disabled.

�I don�t know what we can do� to break the impasse and re-start talks, House Majority Leader Denise W. Merrill, D-Mansfield, said, adding Democrats would not abandon their top priorities.

Reverses gov�s cuts, raises taxes

The budget approved Friday reverses Rell proposals to cut funding for nursing homes, nonprofit social service agencies, prescription drug subsidies for the elderly, family resource centers, community-based health clinics, and food vouchers for the poor. It also scraps her proposal to close Manchester Superior Court and five other courthouses across the state.

�In our efforts to balance this budget, let us not forget our primary mission, a moral obligation to the people of this state,� Merrill said during the floor debate. �There are some things that are worth fighting for and necessary to preserve.�

To help preserve those priorities, the legislature endorsed the largest tax hike in state history.

The linchpin of the plan is a revised revenue proposal that scales back the $3.3 billion tax hike proposed by the Finance Committee. The package adopted Thursday levies $2.5 billion in new taxes over the next two fiscal years to support spending $17.6 billion in 2009-10 and $18.1 billion in 2010-11. This year�s $18.4 billion budget is about $1 billion in deficit.

Most of those tax hikes are aimed either at the wealthy or at businesses.

Besides three new state income tax rates, which begin with couples earning at least $500,000 and individuals earning at least $265,000, there is a 30 percent surcharge on the estate tax. That levy only affects estates valued at more than $2 million.

A 25 percent surcharge would be placed on the corporation tax and 75 cents per pack would be added to the cigarette levy.

Democrats dropped two tax proposals from the Finance Committee in hopes of building support for their plan. One would have phased out a popular $500 income tax credit that helps middle-income families cover municipal property tax expenses. A second would have eliminated about $80 million in sales tax exemptions.

Vague components

�This bill is going to become the expense of our children, because we can�t make hard decisions,� said Rep. Craig Miner of Litchfield, ranking House Republican on the Appropriations Committee.

Republicans in both chambers argued this week that Democrats didn�t cut spending enough, and that their last-minute effort to adopt a partisan budget before the fiscal year ended produced a sloppy plan riddled with fiscal holes.

On paper, the $35.7 billion plan crafted by the Democrats spends less over two years than the $37.1 billion budget offered by Rell.

But that�s because it also ignores close to $2.3 billion in funding needed to maintain the entire Special Transportation Fund, which provides funding for the Transportation and Motor Vehicles departments, as well as covering debt service on nearly all financed road maintenance and bridge repair projects.

Democrats offered no explanation as to why they voted on a budget with this segment not complete.

Among some of the other vague components of the Democratic plan are:

� A two-year savings of $70 million to be achieved by closing two prisons. It never identifies which facilities would be closed, and the first of the two fiscal years over which savings would be achieved starts in four days.

The prison closure plan drew an angry response Thursday from Sen. John A. Kissel, R-Enfield, who called it �preposterous.�

Connecticut�s inmate population has fallen over the past year from about 19,400 to just under 18,900. But Kissel added that less than a year ago he and other lawmakers were touring prisons that guards were describing as dangerously overcrowded.

� A two-year savings of $112.5 million by selling unidentified state assets.

Ironically, Democratic leaders ripped minority Republicans in April for suggesting that state government could mitigate its fiscal problems by selling off some of its assets. Donovan repeatedly questioned whether Republicans wanted to sell state beaches this summer, even though the minority party suggested selling airports, not parks or beaches.

� A series of 10 percent and 20 percent across-the-board reductions on smaller state agencies, without specifics on how those savings are to be achieved.

� A mandate that the executive branch save $23 million over the next two years by reducing management by 10 percent.

� A $125 million savings over two years by withholding the state�s regular contributions to retiree health care programs for teachers and municipal employees. But the budget doesn�t require cities and towns to make up the difference.

� More than $125 million in new revenue raised from license, permit, and other fee increases. But the budget bill doesn�t identify them. Democrats say they intend to vote later to adopt most of the fee hikes Rell recommended in her first budget proposal, issued in February.

� Gaining a $335 million, one-time, lump sum payment in 2011 by �securitizing� or selling the rights to a larger amount of state revenues in the future. The budget doesn�t identify which revenues, or how much would be sold.

Despite all of the frustrations both sides were feeling Friday over the budget gridlock, House Minority Leader Lawrence F. Cafero, R-Norwalk, predicted that within a matter of days, negotiations would be scheduled again.

�I think we all care enough about this state and we need an exit plan,� he said, adding he expects the governor and top Democratic lawmakers will be feeling more pressure to resume talks. �A lot of phone calls will be made privately. I�ll be more than willing to make them.�