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Finance Committee Poised To Sunset Tax, But Borrow More

by Christine Stuart | Apr 16, 2013 6:12pm
(9) Comments | Commenting has expired
Posted to: Energy, Taxes

Courtesy of Millstone

In order to give itself some breathing room, the Finance Committee restructured the state’s debt Tuesday in a way that also allows it to sunset the electric generation tax as promised.

While the committee won’t be taking definitive action on erasing the tax until Friday, their actions Tuesday paved the way for them to cover the amount of the tax through borrowing. Payment of the debt will be pushed off until after the November 2014 elections.

The idea was promoted by Sen. Andrea Stillman, D-Waterford, whose district includes the Millstone Nuclear Power Plant. She defended the decision to borrow in order to sunset the tax because of the adverse impact that extending the tax would have had on electricity rates in the region.

In February, the same week Gov. Dannel P. Malloy extended the tax in his budget proposal, Attorney Generals in Rhode Island and Massachusetts wrote Connecticut legislative leaders and asked them not to continue it. The two expressed sympathy for Connecticut’s fiscal situation, but said they believe the tax on electricity generation — a commodity that is bought and sold on a regional basis — will raise the rates on residents in their states.

Hugh McQuaid photo

Sen. Andrea Stillman

Implemented in the 2011 budget cycle, the electric generation tax is generating about $76 million a year and the company paying the bulk of that — about $42 million — is Dominion, which owns the Millstone Nuclear Power Plant in Waterford. It was scheduled to sunset this year, but because he was facing a projected $2.2 billion shortfall over the next two years, Gov. Malloy decided to extend the tax another two years in his February budget proposal.

The Malloy administration said it’s waiting to see the full legislative budget proposal before commenting on where the Finance Committee seemed to be heading Tuesday.

It’s a direction some Republican lawmakers don’t want to be headed.

“We’re just pushing our debt down the road,” Rep. Vincent Candelora, R-North Branford, said. “It’s not a good idea.”

House Minority Leader Lawrence Cafero, R-Norwalk, agreed. He said it’s just perpetuating a problem into the future.

He suggested there’s other borrowing the state does where the return on investment is smaller, like the Teachers’ Retirement Fund. Ideas like that should have been considered if the committee is serious about eliminating this tax, he added.

Kevin R. Hennessy, director of federal, state, and local affairs in New England for Dominion, applauded the direction the Finance Committee’s move to sunset the tax.

“The Finance Committee decided it wanted to honor the state’s commitment to sunset the tax and made sure it wasn’t going to do anything to raise electricity rates,” Hennessy said. “We view this as a positive step.”

But Sen. Minority Leader John McKinney, R-Fairfield, balked at the idea of borrowing to eliminate a tax.

“I refuse to believe that the state’s only options are an unfair tax today, or borrowing and paying higher interest tomorrow,” McKinney said. “The state needs to cut spending. I certainly hope that the passage of this bonding bill isn’t an indication that the Democrats plan to follow suit with the governor and propose another unaffordable state spending increase when they announce their budget on Friday.”

The Finance Committee voted mostly along party lines Tuesday to restructure the 2009 Economic Recovery Notes and reduce debt service $46 million in 2014. It also recommended a decrease in the debt service payment on the bonds to only $12 million annually.

According to the Office of Fiscal Analysis, this change is projected to cost an additional $14 million in interest above the $218 million in interest it would have cost under the governor’s proposal.

“All we’re doing is backloading the debt by paying smaller amounts in the first two years, and larger amounts in the last three years,” Candelora said. “It doesn’t erase the problem.”

McKinney said he doesn’t understand how the Democrat-controlled Finance Committee could take a proposal from a Democratic governor and make it worse.

“You would never teach your children to manage debt by paying credit cards off with credit cards, but that’s exactly what the state of Connecticut is doing and, eventually, we’re going to expect our children to pick up the tab,” he said. “This is a poor start to the legislative budget process and I implore Democratic leaders to revisit this mistake. I will not support any budget that employs such irresponsible gimmicks.”

The Finance and Appropriations Committee are looking to release their budget proposals on Friday.

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(9) Comments

posted by: Noteworthy | April 16, 2013  9:00pm

I’m confused. There is all this lip service about mounting debt and debt service - among the worst in the nation. And yet, they approve more and more debt. Approving debt to cover operating expenses is just not right any more than it was not right when this group did it the last time. Overall? Lame.

posted by: Fisherman | April 16, 2013  9:02pm

Q: What’s the BEST THING to happen to the Republican Party?

A: Mr. Dan Malloy

posted by: dano860 | April 17, 2013  7:58am

Put the tax where you want, it still comes out of the purses and wallets of the citizens. Borrowing is bonding and we all pay for it sooner or later.
We should never forget that “Companies and business’s DO NOT pay taxes, they pass them on to the consumer”.
It seems as though the Dems have taken up the same philosophy, pass it on to the youth and future generations.
When will we see cost cutting, eliminate some programs,NOW, the people in Hartford are out of touch with reality!
I ask the simple question,“Would you allow these people to manage your finances?”

posted by: BrianO | April 17, 2013  9:51am

Living beyond our means and a lack of fiscal planning has been a truely bi-partisan effort that has spanned 30 years in our state.  Let’s stop fixing blame for short term political gain and fix the problem(s).

posted by: Nutmeg87 | April 17, 2013  9:53am

Well…  keep raising taxes & wealthy continue to leave state…  Leaving every kid the bag of debt…

Soon ONLY those working & living off State will be left…  Guess then, you can stick it to the man…

posted by: JAM | April 17, 2013  9:53am

Not that there was any doubt, but this is proof positive that neither the Governor nor the Legislature’s Democrats have any ability to cut spending.
Malloy opened the door by proposing to fund the Budget with debt, and this is just a logical extension of that approach.
There will be no stoppoing this fiscal irresponsibilty in the future once the precedent is set.

posted by: Joebigjoe | April 17, 2013  11:32am

They cant cut spending but they cant because they know enough of their people dont care. The elections are being carried by the cities, and government workers. I’m waiting for the law that if you are unemployed your vote automatically goes to the challenger because obviously the one in office isnt getting the job done and if you are voting for them again it’s because you are getting some govt subsidy. I guess I will wait until its a cold day in hell to see that law.

posted by: joemanc | April 17, 2013  1:00pm

Lots of comments by Republican politicians that we should cut spending…I agree…but no mention from them on what should be cut. How about an alternative budget guys? Show your cards…

posted by: Matt W. | April 17, 2013  4:03pm

Matt W.

Joemanc: you can start with the permanent commissions for every historically disadvantaged group in existence.  These groups can AND SHOULD organize on their own to lobby the govt like every other group.  From there you can move to DOT where hundreds of millions of state and federal dollars are wasted under the guise of “planning and administration”.  This money is actually primarily consumed by outside consulting agencies and used to support the outrageous health and retirement burden of current and former employees.  Then you can wipe out the EITC which was doomed to be riddled with fraud and waste from day one (just as the federal program has been).  If you get tired, I’d suggest you take a break before you look into UCONN and what’s going on there.  Then you can contemplate the wisdom of throwing tens of millions of dollars at companies in the hopes that they hire what amounts to hundreds of people and in the face of a long term state job decline in the 80,000 range.  That would be a good start.