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Malloy Offers Lawmakers A Mix of Tax Increases, Spending Cuts To Erase Red Ink

by | Dec 13, 2017 1:05pm
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Posted to: State Budget, Special Session, Taxes, State Capitol

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Gov. Dannel P. Malloy

HARTFORD, CT — Gov. Dannel P. Malloy presented legislative leaders Wednesday with more than $303 million in spending cuts and tax increases as they seek to resolve a $208 million budget deficit.

Malloy, who didn’t negotiate the final budget agreement that’s now out of balance by enough to trigger a deficit mitigation, said he knows that the options he’s putting on the table “will be almost universally objectionable.”

“However, I have a clear statutory obligation to provide you with a plan to mitigate the deficit,” Malloy added in a letter. “Moreover, I believe we do a disservice to the public when we defer necessary steps and fail to take decisive action, ultimately making the cost to taxpayers and damage to government services even more severe.”

The $303 million in spending cuts and tax increases is enough to help restore the cuts to the Medicare Savings Program and possibly the $91 million in municipal aid cuts Malloy made last month under the discretion given to him by legislative leaders.

Legislative leaders are trying to find a way to call themselves back into a special session to restore funding for the Medicare Savings Program before the end of the year. Malloy, who could call them back into special session but has so far refused, suggested that if they’re going to return to restore funding then they should also erase the deficit that cropped up a month after they passed a budget.

The proposal Malloy gave lawmakers Wednesday includes $189 million in revenue increases and $113 million in spending cuts.

“Like you, I would prefer not to rely on any tax increases at all. However, just as your bipartisan budget raised taxes by about $500 million in FY 2018, it appears that a continued mix of spending cuts and revenue changes may be needed in order to bring it into balance.”

The revenue suggestions made by Malloy include increases in the sales, cigarette, hotel, and a new “restaurant tax,” which was first pitched by the House Democrats back in June.

The menu of options Malloy presented lawmakers Wednesday include increasing the sales tax from 6.35 percent to 6.5 percent would bring in about $33.4 million in 2018 and $98.2 million in 2019. Increasing the sales tax from 6.5 to 6.9 percent would raise $81 million in 2018 and $237.2 million in 2019.

A restaurant tax of 7 percent would bring in $9.9 million in 2018 and $30.7 million in 2019.

Malloy also suggested increasing the cigarette tax by 25 cents to $4.60 per pack and raising the tax on cigars from 50 cents to $1.50. And imposing a 75 percent excise tax on e-cigarettes. He also suggested increasing the real estate conveyance tax and eliminating minimum bottle pricing on alcohol, a change Malloy has been fighting with the package store lobby over for seven years. 

On the spending side, Malloy said he maintained the funding agreement on the hospitals and it does not close any regional state agency offices or burden higher education or make significant cuts to the Department of Developmental Services.

“If you choose not to consider additional revenues when balancing the budget, it would be difficult or potentially impossible to avoid impacts in areas such as these,” Malloy said in his letter.

As part of the $113 million in spending cuts, Malloy proposed closing the Old State House to save $200,000 in 2018 and $500,000 in 2019.

He would also eliminate grants to Community Health Centers, support for school based health centers, a family support grant, grants for substance abuse services, and some Medicaid funding for the elderly and disabled who are receiving help to cover their Medicare Part D co-payments. The spending cuts would also eliminate the category for the lowest level of need under the state-funded home care program, and reduce funding for emergency placements. The proposal also seeks to reduce the $219 per month Connecticut’s poorest residents receive under the State Administered General Assistance program to $175 per month.

It also reduces funding for the Care4Kids program by $18 million in 2018 and $49 million in 2019. The reduction in funding would close enrollment to the program, which helps subsidize the cost of childcare for working families.

Senate President Martin Looney, D-New Haven, was the first to react to the governor’s letter.

“Democrats and Republicans have already proven that we can work together to find bipartisan solutions - including cuts and revenues - to address Connecticut’s budget,” Looney said. “I appreciate the work of the administration in developing a plan to bring the budget back into balance. It is important that in the coming days leaders from both parties review the proposal and once again work together to find a responsible bipartisan solution.”

House Speaker Joe Aresimowicz, D-Berlin, said they can now begin assessing the details and discuss the ideas they’ve been hearing from individual legislators.

“Though there seems to be no off season, by continuing to work with all the caucuses on a bipartisan basis I’m confident we will keep the budget balanced going forward,” Aresimowicz said.

House Minority Leader Themis Klarides, R-Derby, said she appreciates the governor’s proposal, but two-thirds of it involves raising revenues.

“Our priority remains the same: restoring funds for more than 100,000 needy elderly people and the disabled who rely on Medicare services in Connecticut,” Klarides said. “That is why House Republicans and Democrats already submitted petitions to call us into special session to act immediately.”

Senate Republican President Len Fasano, R-North Haven, said the nearly $200 million in tax increases are a “non-starter.”

“Connecticut is suffering deficits due to a sluggish economy created by years of historic tax increases passed by Gov. Malloy and Democrat lawmakers without any thought for how these taxes would hurt our state in the long run,” Fasano said. “I have serious concerns about many aspects of the governor’s menu of options, but I will continue to review the full list of choices in detail and look forward to meeting with fellow legislators to outline an appropriate course of action.”

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