Democrats Reach Budget Deal With Gov. Malloy
by Christine Stuart and Hugh McQuaid | Apr 20, 2011 4:44pm
(11) Comments | Commenting has expired
Posted to: State Budget
(Updated 8 p.m.) Democratic legislative leaders and Gov. Dannel P. Malloy announced Wednesday evening that they had reached a two-year budget deal that lowers the tax increase in the first year by $116.7 million and reduces spending cuts by about $125 million.
The budget deal they struck will be debated Thursday by the Finance and Appropriations Committee and it assumes Malloy will emerge victorious in getting $2 billion in concessions through negotiations with state labor unions. Malloy said the General Assembly could vote on the budget even without the labor concessions some time next week.
Slim on details, four pages of numbers distributed by the Democrats show they nixed Malloy’s proposal to increase taxes on boats and automobiles. The deal also restores the suspension of the sales tax for a week in August, continues the sales tax exemptions on haircuts, and maintains the sales tax on spa services.
In addition, the deal would eliminate the throwback rule, which would collect taxes on out-of-state business conducted by Connecticut companies, and instead increases the corporation tax from 10 percent to 20 percent. Sources say these two changes were the result of Malloy’s dinner in late March with the chief executive officers of five of the state’s largest employers.
Malloy’s Budget Director Ben Barnes said they heard complaints from small manufacturers that the throwback rule would hurt them and several large companies told them they prefer the certainty the corporation tax provides. Of course, based on a Department of Revenue Services report from earlier this year it’s also clear about two-thirds of Connecticut’s companies pay the minimum $250 or nothing in corporate taxes.
While rank-and-file lawmakers were briefed on the contents of the budget deal, none were provided with specifics aside from a one-page document with few details.
Sen. President Donald Williams, D-Brooklyn, said the decreased tax increases and reductions in spending will be made up with federal revenue from changes made to the hospital provider tax. But details will remain scarce until the full budget is released Thursday morning.
“This is not the end of the budget process but it is a giant step forward,” Williams said.
Standing side-by-side with legislative leaders, Malloy made a similar statement about the deal, saying it isn’t a celebration, but it is one step forward in the budget process. “We are at a point sooner than I anticipated we would be,“ Malloy said.
Malloy has asked the General Assembly to get him a budget by May 6.
“From the beginning, we talked about how making certain ‘shared sacrifice‘ also needs to be ‘fair sacrifice,’” House Speaker Chris Donovan said, echoing a letter signed by 65 members of his caucus more than a week ago.
Malloy’s modification to the income tax structure and restoration of a property tax credit in reduced form last week went a long way toward meeting Donovan’s call for wealthier residents to pay more.
While Malloy argued it was a matter of how little time he had to make a deal, Republican leaders complained that were again left out of the budget discussions.
Republicans called the budget proposal a “one-party vision of Connecticut.”
“From the inception [Democrats] have said ‘we don’t need you guys.’ Republicans, people who represent one third of the state of Connecticut. Even though this governor won by the slimmest of majorities, he wants this to be a completely Democratic solution,” House Minority Leader Larry Cafero said.
Senate Minority Leader John McKinney said the only thing about the announcement that surprised him was that Malloy continues to say he is working with Republicans.
“I think he just needs to be honest about that. Yes, he’s called us. Yes, he’s talked to us. He hasn’t taken any of our ideas. He hasn’t had serious discussions about any of our ideas,” McKinney said.
McKinney said that when asked about the Republican budget, the governor said that the time for negotiating the budget was running out and then followed the statement by saying an agreement had been reached much sooner than expected.
Republicans also criticized the budget deal for the assumption that Malloy will get $2 billion in concessions from the state employee unions.
Cafero said that as long as he can remember, the state has never passed a budget with $2 billion that has not been solidified in some shape or form. The state’s constitution calls for a balanced budget, he said, adding, “We’ve just heard that the governor is willing to sign a bill without having $2 billion worth of that budget settled.”
However, that may be a gross understatement since every budget passed over the last decade has assumed some unspecified lapses.
The two also cautioned the legislature against quickly passing Malloy’s budget. If they pass the budget but Malloy fails to get the concessions, they’ve made a big mistake, McKinney said.
McKinney said the legislature has not even committed to coming back to re-adjust if an unbalanced budget is passed.
“That’s just a complete abdication of our role as a legislature,” he said.
A State Employee Bargaining Agent Coalition spokesman said he was pleased to see “that the budget has seen some improvements, such as asking the very rich to pay more of their share, as opposed to ideas, like eliminating the property tax credit, that further hurt struggling working and middle class families.”
However, “We would still like to see much more asked from big multi-state businesses and the very rich who have so far been the only ones to share in our state’s so-called economic recovery,” Larry Dorman, SEBAC spokesman, said in a statement.
“We will continue our discussions with the governor to see if common ground can be found between him and those struggling middle class families who happen to work for the state.”
Editor’s note: The budget does not nix the tax on airplanes.
Tags: budget, malloy, democrats
(11) Comments
posted by: Noteworthy | April 20, 2011 7:22pm
They all announced they agreed with themselves and refused to listen to anybody who was not singing in the tax them to he’ll choir. What’s new and why announce that? We are supposed to be surprised? Right. Oh, and just asking…if Companies like UTC and BOA can just shift profits elsewhere and pay no tax then we’ll now be getting 20% of zero instead of 10% of zero but local job creating companies get slammed. Ok. Great ideas from the pinhead crowd.
posted by: ... | April 20, 2011 11:08pm
So withdrawing the sales tax on hair cuts and spa treatments (local jobs) are not good ideas noteworthy? Withdrawing the new tax on some luxury goods and lowering the increases in taxes not a good idea noteworthy? You’re ‘noteworthy’ on complaining and name-calling, but few answers to our problems. Please share
posted by: Noteworthy | April 21, 2011 10:06am
Jones:
1:6 mgmt ratio for state employees is akin to running an adult daycare. Malloy wont visit this until next year. There are very few cost reductions. Overall spending increases and the bulk of this never ending debacle is more of the same. And let’s not forget the new $120 million entitlement. If you cut nothing or make cuts that are then supplanted by more spending, what have you accomplished? Nothing.
Malloys budget still rapes taxpayers for $3 billion so that status quo can prevail. Answer? Start with cuts. Real cuts that decreases overall spending. Cut the managers. Close departments. Get rid of the permanent commissions. And lay off employees. Close the loopholes so BOA cant divert profits. If that’s insufficient, ask me for more money.
posted by: BMS | April 21, 2011 10:08am
The legislature is about to pass a budget that includes two billion in union concessions. Should the union leadership and the Governor’s representative come up with a proposal to present to the rank and file membership to vote on, it still requires passage. I have talked to friends that are state employees about the concessions. They seem to be willing to take pay freezes and unpaid furlough days as they did two years ago. However, as you go past those give backs resistance to further give backs is quite strong. Those gives backs fall way short of what the Governor is requesting. I think everybody knows the two billion won’t happen so why pass the budget?
posted by: Matt W. | April 21, 2011 10:40am
The barber and carwash lobbies strike again!
CT - on track to be the most presentable poor people in America!
posted by: ... | April 21, 2011 3:21pm
1.8 billion in cuts over 2 years noteworthy. Play games with numbers all you like, but most people who have a clue about this budget and actually read the costs in-depth know the true amounts. Once, again, noteworthy for warping facts, name-calling, and overused rhetoric to make someone look evil in their policies.
posted by: Noteworthy | April 21, 2011 7:18pm
Jones:
I’ve read the budget and the only cuts that are real are the first year and that’s not $1.8 billion and it’s certainly not $1.8 billion across two.
Second: Even if you are correct, it is dwarfed by the amount of tax increases. Third: At the end of the day, pending a review of what the spending side looks like, what Malloy proposed is spending more money by 5% than the current year. Those are the facts. You might try reading them once in a while and not through the rose colored glasses of somebody’s spin machine.
posted by: ... | April 22, 2011 3:16am
No problem with my crystal clear glasses Noteworthy.
I’m talking about updated figures report by CT-N, the official broadcaster of CT politics at the Capitol Building (which you should watch its weekly report sometime) that has clearly stated 1.8 billion in cuts from his plan.
Its good to have a copy of the original proposal (I still have mine), but this is an evolving bill. Maybe lose the horse blinds and realize things are changing all the time all around you, not one singular direction.
I hope you wouldn’t be such a defeatist as to think whatever Malloy proposes will become law of the land. We’ve already seen him drawback on previously proposed taxes and go against new tax bills (Millstone).
But maybe we should continue borrowing to pay for the adjusted increases in health-care payments, as well pension liabilities, rather than trying to solve a problem. The EIC (if it even passes at its current %, which I doubt), is minimal in the new spending compared to these issues (a fact). So what do you say, keep borrowing to fund things, or start paying for them (especially programs we can’t touch or seriously renegotiate until 2017)?
posted by: The Barefoot Accountant | May 8, 2011 10:18pm
Connecticut Governor Daniel Malloy’s tax bill is very regressive, placing the burden of the deficit squarely on the shoulders of the middle class.
If you are in the middle class in Connecticut, be prepared for a shocker. The Connecticut income tax rate is increasing anywhere from 10% to 30% over that of last year on middle class residents. Plus there are a number of other increases in taxes and fees on clothing, alcohol, tobacco, cigarettes, conveyance taxes, motor vehicle registrations, etc., targeting the wallets and pocketbooks of middle class residents.
Of course, the rich in Connecticut are only experiencing a mere 3% increase in their Connecticut income tax rate over that of last year. Now that’s quite a disparity in increments in the state income tax rate between the rich and the middle class taxpayers in Connecticut, isn’t it? Is this sharing the pain of our pitiful economy?
If Foley were Governor, perhaps I could understand the inequitable sharing of the economic pain here in Connecticut. But Daniel Malloy is a Democrat, isn’t he? Or is he?
Daniel Malloy was born in Stamford and served as Mayor in Stamford. As you know, Stamford is located in Fairfield County, one of the richest counties in the entire United States. It is where many of the rich Wall Streeters live. You know, those CEOs of S&P corporations who earned on average over $11 million in 2009. Could it be that Malloy is a Democrat in sheep’s clothing?
One can only wonder if Daniel Malloy is intentionally positioning himself right of the political center because of future political aspirations. This political strategy of inching to the right as the Republican Congress leaps to the right has worked very successfully for Democrats like Barack Obama and Bill Clinton. Recall that Obama raised $700 million in his run for President in 2008. Those Wall Streeters have a lot more money to contribute to candidates than you and I do.
So expect to pay an additional 10% or more in Connecticut income taxes this year. And more in sales taxes, and other taxes and fees. And also be prepared to see that Connecticut property tax credit dwindle down to $300 from $500.
Whatever happened to the progressive tax structure of Franklin Delano Roosevelt? Those happy days are not here anymore. And the way our political candidates have been positioning themselves, they will never be here again.
For more specifics on the new tax bill, please see the article, http://www.cpa-connecticut.com/blog/?p=2906.
The Barefoot Accountant