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Compromise Budget Would Eliminate Car Tax, Increase Teacher Pension Contributions

by | Oct 19, 2017 2:21pm () Comments | Commenting has expired | Share
Posted to: State Budget, Special Session, Pensions, Taxes, State Capitol

Christine Stuart / ctnewsjunkie HARTFORD, CT — Democratic and Republican legislative leaders in the House briefed rank-and-file lawmakers on the tentative compromise budget deal Thursday and emerged confident they can still pass a budget, even if they haven’t finalized it yet.

As the day progressed more details about what was in the proposal became known and the give and take of 13 days of closed-door budget negotiations came into greater focus.

One of the hurdles lawmakers faced was figuring out how to spare cities and towns from having to pay part of what will be a ballooning payment over the next few years to the teacher’s retirement system. Both Democratic and Republican lawmakers said that was the number one priority of the teacher unions and the municipalities.

Instead of asking towns to pick up part of the tab, it asks teachers to contribute 1 percent more of their salaries to their pensions. They currently contribute about 6 percent. The compromise budget would have them contribute 7 percent.

Lawmakers are hoping the additional contributions will begin to stabilize the fund.

The Connecticut Education Association said teachers are opposed to the increased contribution, which they are calling a tax.

“Over the years, the state has not fully funded or paid its share of the teacher retirement plan—which, at 4.56 percent, is less than what teachers have contributed for decades. It is unfair to punish teachers with an increase in the payroll tax to pay a portion of the state’s share.”

The compromise budget would also cap motor vehicle taxes at 39 mills in the first year and eliminate motor vehicle taxes, which are levied by municipalities, completely in the second year.

The last time lawmakers considered eliminating the motor vehicle tax was back in 2013.

According to the Office of Policy and Management the motor vehicle tax raises more than $700 million per year for cities and towns. Getting rid of it would force municipalities to find efficiencies or shift the amount they receive from motor vehicle taxes to real property taxes. The property tax is the only way municipalities can raise revenue. 

“We believe not taxing a motor vehicle is a good policy,” House Speaker Joe Aresimowicz, D-Berlin, said.

Christine Stuart / ctnewsjunkie He said it would be more efficient to pay the motor vehicle tax as part of the property tax.

“It’s a nuisance tax,” Aresimowicz said.

Kevin Maloney, a spokesman for the Connecticut Conference of Municipalities, said the organization opposes the elimination of the tax because it will only increase the tax burden on residents and businesses.

Eliminating the motor vehicle taxes is one of the outstanding issues Democratic legislative leaders and Republican legislative leaders have been unable to work out.

“That’s why I keep saying these are tentative agreements on major issues,” House Minority Leader Themis Klarides, R-Derby, said.

She said she can’t say how many of her members will or won’t support this compromise package “because there are always tweaks to be made.”

That being said, she said she’s proud of the “damage we stopped.”

At the same time there’s stuff in the tentative agreement that Klarides doesn’t like.

The compromise budget proposal would also sweep money from clean energy funds, including those paid for through ratepayers electrical bills.

Klarides said it wasn’t her preference to cut the funds, but that’s what it means to compromise.

Majority Leader Matt Ritter, D-Hartford, said people understood if they didn’t use some of those energy funds they would have to cut mental health or other social services.

“People understood it was a trade off,” Ritter said.

Michael Trahan of Solar Connecticut told Aresimowicz and Ritter that “using ratepayer money as taxpayer revenue is a gimmick plain and simple.” He said it’s simply hiding behind “kids and old people to avoid making truly difficult spending cuts or increasing taxes.”

He called it a “new legislative low.”

Aresimowicz said “a vast majority” of Democratic lawmakers will vote in favor of the compromise budget.

Since the budget proposal would include a constitutional spending cap it’s necessary for it to pass the House with 91 votes and the Senate with 22 votes.

The spending cap calculation will include the contribution to the state employees pensions after 2023 and the teacher’s pension fund contributions will be added after 2027. Any federal funding that is a federal mandate would be excluded in the first year and rolled into the second year.

“So it will be a true spending cap,” Aresimowicz said.

In order to pass a budget that includes a constitutional spending cap the legislature would have to pass it with 91 votes in the House and 22 in the Senate.

The compromise budget would also increase cigarette taxes to 45 cents per pack, raising taxes on a pack of cigarettes to $4.35.

It would also cut the University of Connecticut’s budget about $65 million per year, which is more than the governor proposed but less than what the Republicans proposed. The budget also cuts funding for the Connecticut State University System by $14 million in the first year and $21 million in the second year.

Aresimowicz and Senate President Martin Looney, D-New Haven, are expected to meet with the governor on Saturday to brief him on the budget.

Gov. Dannel P. Malloy, who vetoed the Republican budget that passed with the help of eight Democrats, said he doesn’t have a budget document in front of him so he can’t make a judgment about what legislative leaders have proposed.

“One of the things we want to see is what is the spending cap language,” Malloy said.

He said without a single Republican vote for a budget in a decade getting a spending cap has been “impossible.” He said it may be possible now, but “we don’t know what the language is.”

Malloy has been running the state by executive order since July 1. This is the longest the state has ever gone without a state budget.

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