Lawmakers Rule Out Tax Increase, Look To Spending Cuts, Tax Exemptions
The co-chairs of the Finance, Revenue, and Bonding Committee said they don’t plan to increase taxes to balance the budget, but they said some of Gov. Dannel P. Malloy’s proposed tax relief, in addition to the $55 refund, may have to be postponed.
Rep. Patricia Widlitz, D-Guilford, said things like the sales tax exemption for over-the-counter drugs and other tax breaks they planned to offer when there was a surplus are under discussion in closed-door budget meetings. She declined to offer specifics about what tax breaks may disappear from the final budget.
The sales tax exemption on over-the-counter drugs would cost the state about $16.5 million in revenue. Exempting part of teachers’ pensions, like Malloy proposed, would cost the state about $23.1 million. Exempting municipal employees from a health insurance tax would cost about $8.7 million.
“All of those things are under discussion,” Widlitz said Monday.
The Office of Policy and Management declined to say exactly how far down its revenue projections are or if they’re different than the Office of Fiscal Analysis, which estimated Monday that revenues are lagging by about $276.9 million.
“The governor said several hundred million dollars and until we have an agreement with OFA on the projection we’d rather not give a number,” said Gian-Carl Casa, undersecretary for legislative affairs with the Office of Policy and Management.
The Office of Policy and Management and the Office of Fiscal Analysis must come to an agreement on revenues by the end of the day Wednesday, April 30.
No matter what happens, “I can tell you one thing, we’re not raising taxes,” Sen. John Fonfara, D-Hartford, said.
Malloy announced Monday that he scrapped plans to use $155 million on a $55 taxpayer refund and make an additional $100 million payment to the state employee pension plan. The two proposals relied on the state ending this fiscal year with a more than $505 million surplus. That surplus has since disappeared as income tax revenue came in lower than estimated since the April 15 deadline.
“I was never concerned about the budget deal revolving around excess revenue,” House Minority Leader Lawrence Cafero, R-Norwalk, said Monday. “What I’m concerned about is the budget itself. That has to be balanced. This deficit or less revenues continues on over the next two days, we’re now beyond excess revenue and we’re hitting into the revenue that was there to merely balance the budget.”
It’s a concern for people like Morna Murray, president and CEO of the Connecticut Community Providers Association. The members of the association are private, nonprofit providers who serve Connecticut’s neediest residents and rely on state funding.
Murray said Saturday that they’ve been pretty concerned about revenue projections and even more concerned that some of the funding for her member organizations may disappear. Murray’s organization opposed the $55 tax refund because it felt any additional money should be spent on service providers.
Even before revenues started to take a nosedive, CCPA was concerned its funding may be on the chopping block. There is concern that about $21 million in funding including about $10 million in state grants for outpatient services for those served by the Department of Mental Health and Addiction Services, $2 million for short-term respite care for children under state care, $4.4 million in residential services for the developmentally disabled, and a $5.5 million boost in Medicaid reimbursements.
“These were not increases,” Murray said.
She said the middle of the year adjustments would be enormously helpful to the population these organizations serve as they work through changes to the health care system and figure out exactly what health reform means for the bottom line.
“Medicaid rates don’t come close to covering the cost of care,” Murray said. “It’s been that way for 20 years and many of these organizations are just holding on.”
She said the providers who offer these services on behalf of the state are “salt of the earth folks who are mission driven, but have to cover the cost of care in order to stay in business.” She said any cut could put one of these providers out of business.
“We remain committed to protect the most vulnerable and I think that’s who Morna is representing,” Sen. Beth Bye, co-chairwoman of the Appropriations Committee, said Monday when asked about the potential cuts.
Bye’s co-chair Rep. Toni Walker of New Haven said “everything is in a holding pattern” until the governor’s budget office and the legislature’s budget office agree on revenue estimates. That won’t happen until Wednesday, April 30.
Widlitz said this is the first year the Finance, Revenue, and Bonding Committee co-chairs are at the budget negotiating table. She said in previous years they were not part of the negotiations when it came to the spending side of the budget. She said that was left up to the Appropriations Committee co-chairs. The budget negotiations are between legislative leaders and Malloy’s administration.
Republican lawmakers are not at the table.
“There’s going to be a lot of tough choices that have to be made and, again, I think we make those choices best when we do them together and not to the exclusion of the Republicans,” Cafero said Monday.
Hugh McQuaid contributed to this report.