Rell Offers Two-Year, $31.1 Billion Budget To Lawmakers

By Susan Haigh

Associated Press

HARTFORD — Gov M. Jodi Rell presented her first state budget Wednesday, a two-year, $31.1 billion plan that would raise taxes on people who drink, smoke, and drive a car, but would invest $1.3 billion to reduce traffic gridlock in Connecticut.

The tax and spending proposal, which received mixed reactions from state legislators, also calls for breaking the state’s constitutional spending cap to take advantage of an estimated $238 million in federal money for cash-strapped nursing homes and other facilities that care for people on Medicaid.

Appearing before a joint session of the Democratic-controlled legislature, the Republican governor acknowledged that her budget reflects many difficult choices needed to help close an estimated $1.2 billion deficit in the fiscal year that begins in July.

“The truth is, we cannot afford to pay for every program and every service we should provide,” she said.

Her budget would increase spending by 3.9 percent in each of the next two fiscal years. She proposes a $58 million increase in Department of Children and Families spending, a $57 million increase for local education and special education, and $20 million to encourage stem cell research in Connecticut.

But her plan also includes about $140 million in new taxes in the first year and $158 million in the second. They include a 74 cent increase in the state’s cigarette tax, to $2.25 per pack. While that would be the largest cigarette tax hike in state history, Rell’s office said it would keep the state tax lower than similar taxes in New Jersey, Rhode Island, and New York City.

Rell’s budget also raises taxes on cigars, pipe, and chewing tobacco from 20 percent to 90 percent of those products’ wholesale value. The tax on snuff would rise from 40 cents to $1.80 per ounce.

The governor also wants to increase the tax on alcohol by 15 percent. Her budget director said that would raise the price of beer by about two cents per six pack.

Rell proposes phasing out the corporate surcharge over two years. The surcharge, which corporations pay on top of their taxes, would drop from 25 percent to 15 percent in the 2005 income year, and to 10 percent in the 2006 income year. The tax would end on December 31, 2006.

Also, Rell is proposing an end to the state’s research and development tax credit exchange program for firms that don’t make a profit, because participating firms haven’t been required to produce jobs in return for the credit.

Democrats said they were disappointed by the taxes Rell chose to increase. They are pushing to revamp the personal income tax and impose a higher rate on those who earn $1 million a year or more.

The governor’s budget would increase premiums for poor people on Connecticut’s HUSKY health care program, reduce transitional Medicaid coverage from 24 to 12 months, reduce state reimbursements to pharmacies, and delay plans to replenish the property tax credit for personal income tax filers from $350 to $500.

“It’s the same people who’ve been paying all along — property taxpayers, middle income families, those who can’t afford it,” said Lt Gov Kevin Sullivan, a Democrat.

Rep Cameron Staples, D-New Haven, co-chairman of the legislature’s tax-writing committee, said the fact Rell is proposing tax increases indicates the state is facing tough times. But he, too, is concerned that Rell’s budget doesn’t offer tax relief to the poor and middle class.

“I don’t think they should be bearing the burden of all of the fiscal needs of the state of Connecticut,” he said.

But Republicans, who typically oppose tax increases, said they’re willing to work with Rell.

“She is a tell-it-like-it-is governor and was very straightforward. She has made real efforts to control spending,” said House Minority Leader Robert Ward, R-North Branford. “Although I don’t agree with all of her tax proposals, she is to be given credit for being forthright and saying that’s what they are.”

Rell included in her budget plan a major initiative designed to ease the gridlock on Connecticut’s highways.

The governor would spend $1.3 billion on the state’s transportation infrastructure, including improvements to Interstate 95, new rail cars for Metro-North’s New Haven line, and new transit buses.

To pay for that, she proposes raising the state’s gasoline tax by six cents over the next eight years, and later reducing it by a penny in 2016. She also proposed implementing $1 surcharge on Metro-North tickets along the New Haven line in Connecticut beginning in 2008. The money will be used to buy the new rail cars.

Sen William Nickerson, R-Greenwich, called it the “boldest and most imaginative” transportation proposal in his 20 years in the state legislature.

“Yes, it has to be paid for, but that was obvious,” he said. “A dollar out of a taxpayer’s pocket will be a dollar returned to them in a tangible service.”

Rell also proposed a new tax on nursing home services, a plan that would make the state eligible for matching funds from Washington. But the idea received only mild support from lawmakers and the nursing home industry.

Washington currently reimburses Connecticut for 50 percent of its Medicaid expenses. If Rell’s tax is used to reimburse homes for Medicaid services, Connecticut could receive an additional $118 million from Washington to distribute to the homes and hundreds of private agencies that care for state clients.

Robert Genuario, Rell’s budget director, said homes and agencies could receive up to a four percent revenue increase.

“We’re extremely pleased that the governor has acknowledged the seriousness of the nursing home situation and the hard work of our members,” said Deborah Chernoff, a spokeswoman for New England Health Care Employees Union, District 1199. “This is a very good beginning. It’s more money than we’ve seen in a long time. There has to be a lot of discussion of the details.”