Malloy on budget deadlock: ‘This is a failure of the legislature’

Gov. Dannel P. Malloy excoriated the General Assembly on Thursday for failing to vote on even a provisional budget, saving his greatest scorn for the House leadership and any rank-and-file member absent from Connecticut as the fiscal year nears its end on Friday.

Malloy, a Democrat not seeking re-election in 2018, thanked the Senate leaders of both parties for being ready to vote. He pressed reporters to seek a list of the missing in the House, suggesting they failed their state and the responsibilities of their office.

Ultimately, Malloy said, the entire legislature must come to an agreement.

“This is a failure of the legislature to pass a budget,” Malloy said.

The Senate was ready Thursday to vote on a “mini-budget” that would provide a spending plan for the first three months of the fiscal year and buy time for a closely divided legislature to find a compromise on how to resolve a $2.3 billion shortfall in the coming year and $2.8 billion the next. The House was not.

“Democrats and Republicans in the House failed to act on a measure that would have received bipartisan support in the Senate, and I want to thank Sen. Looney and Sen. Fasano for their support,” Malloy said, referring the Democratic and Republican leaders, Martin M. Looney of New Haven and Len Fasano of North Haven.

Fasano was going to make his own political gesture and offer a GOP alternative budget likely to fail on a tie-breaking vote by Lt. Gov. Nancy Wyman.

Instead of a vote on a mini-budget, House Democratic leaders tried to refocus attention off the failings of the day and onto July 18, when they say they intend to vote on a two-year budget that would protect municipal aid and hospitals, but also would raise the sales tax from 6.35 percent to 6.99 percent.

“House Democrats, really happy to announce that we are putting putting forward a two-year budget to address the many fiscal situations we’re finding in our state,” House Speaker Joe Aresimowicz, D-Berlin, said.

He said the day House Democrats hope to vote is one day after state-employee unions are to complete their voting on whether to ratify a tentative concessions deal.

Malloy was dismissive of a plan that he says relies too heavily on new revenue, contrary to the parameters he has set. He laughed when asked if he would veto it.

“Let’s see if they can pass it,” he said. “Let’s see if they can pass it.”

It was unclear if Aresimowicz could clear the bill’s first and, in other times, routine hurdle: Getting Looney, the Senate president pro team, to permit a floor vote in either chamber.

The General Assembly is in special session. No bill can come before either chamber without the signature of both the House speaker and Senate president pro tem. Looney said he could not say if he would sign it.

House Democrats outline their budget alternative

The House Democrats’ two-year, $40.11 billion plan, which would boost General Fund spending about 2 percent annually, would ask a key part of the Democratic base — municipal teachers — to pay more for pensions and give up their third successive tax break on pension income.

In a letter to the governor, Aresimowicz and Majority Leader Matt Ritter, D-Hartford, wrote, “It is our hope to vote on this budget in the House of Representatives on July 18.”

The budget was seen not only as a statement of House Democratic fiscal principles, but also as a rebuff to Fasano, the Senate GOP leader, who’s said repeatedly that Democrats haven’t developed a thorough, “line-by-line” plan for the next two fiscal years.

In reply, Fasano said there are significant tax increases in the Democratic plan: “To our caucus, that’s a non-starter.”

Fasano, who addressed reporters in a bipartisan news conference with Looney, said Aresimowicz and the House Democrats had panicked in the face of criticism.

“Their backs were up against the wall. He caught an awful lot of heat from the press when he said he wasn’t going to vote on this mini-budget,” Fasano said. “There was editorials. There was some panic in that chamber, obviously. And this is the result of that. This is a knee-jerk reaction to significant criticism, that’s what that is.”

Looney neither joined the criticism, nor defended Aresimowicz.

A central provision of the two-year House Democratic plan involves raising the sales tax rate from 6.35 to 6.99 percent. This would raise a projected $419 million in the first year of the new budget and $429 million in the second.

A second sales tax initiative involves a 1 percent sales tax surcharge on restaurant patronage, with the receipts being dedicated to the communities where the establishments are located.

This would generate another $61 million in the first year and $70 million in the second.

The budget also includes a 1 percent increase in the hotel tax that would raise an additional $8.4 million per year.

House Democrats also say their budget would enable them to preserve more local aid than in the governor’s budget proposal, including:

• $127 million more each year in the existing sales-tax revenue-sharing program;
• $58 million more annually in a second program that shares casino receipts;
• $56 million more per year to reimburse communities because private hospitals and colleges are exempt from local taxation.

In addition, the House Democratic plan rejects an income tax hike proposed by the governor on middle class families. Specifically it preserves the $200 income tax credit households can claim to offset local property tax bills.

The new plan rejects proposals from the governor to bill communities $400 million per year to help fund teachers’ pension fund contributions, and to allow communities to tax private, nonprofit hospitals’ real property. That is expected to save hospitals about $210 million annually.

To help pay for these priorities, caucus leadership also recommends asking one of the strongest parts of its political base to sacrifice. The plan would increase the share of salary teachers pay toward their pensions from 6 to 8 percent.

Leaders of the state’s teachers unions balked at the proposal.

“We are shocked and disappointed to see that the proposed House Democratic budget punishes teachers for a problem created by the state—the broken promise to provide the state’s share of teacher retirement funding. Connecticut’s active and retired teachers have paid their share—especially compared to other states—and should not be the scapegoats for the state’s failure,” said Sheila Cohen, president of the Connecticut Education Association.

“All the proposals from lawmakers and the governor have so far relied too heavily upon the sacrifices of working people. Worse, they threaten Connecticut’s quality of life by cutting public education, safety, health and other vital services,” said Jan Hochadel, the president of the state chapter of the American Federation of Teachers. “What we need is a more balanced approach, not more failed austerity policies.”

The Democrats plan also would delay the third consecutive income tax cut in three years for retired teachers. Malloy and the legislature agreed in 2014 to a three-stage tax break for this group.

Starting with the returns filed in the spring of 2015, 10 percent of retired teachers’ pension earnings were income tax-exempt. The exemption increased to 25 percent this past spring, and would reach 50 percent next year.

Suspending that final stage would save the state $8 million per year.

But Malloy said the House Democratic leadership plan is plagued with gimmicks. “There are probably more holes in this than swiss cheese,” he said.

House Democratic leaders set a very aggressive target for unspecified savings in the first year of the new budget, requiring the governor to find $83 million more in efficiencies than his own budget plan recommended.

The governor, who has prioritized transportation throughout his administration, also balked at a proposal to strip $73 million per year in fuel tax receipts from the Special Transportation Fund.

Malloy suggested the House Democrats meet in Fairfield County, which struggles with some of the thickest highway congestion in the nation, when they hope to adopt their two-year budget on July 18.

“Let’s meet down in Stamford at 9 a.m.,” he said.

House Minority Leader Themis Klarides, R-Derby, said her caucus had developed its own provisional budget, a 30-day plan that would prioritize social services, summer youth jobs and hospitals.

“If the governor and the Democrats are serious about avoiding the pain and devastation that would be inflicted by running the state through executive order beginning this weekend, they will support our efforts to craft a compromise,’’ Klarides said.

As she finished talking to reporters, Republican House members standing behind her chanted, “Vote!”

As lawmakers filed in and out of caucuses, they were greeted by state-funded non-profit providers of service and their clients, offering a reminder that their actions or inactions would be felt outside the Capitol.

“July 1 is a real deadline,” said Gian-Carl Casa, president of a nonprofit association. “We appreciate the effort of all the legislative caucuses, but without a resolution the people who suffer will be those struggling with mental illness, substance abuse, domestic violence, re-entry from prison, developmental disabilities and other issues. Every day of the new fiscal year without a budget will be disastrous for them.”