Keith Phaneuf, Jacqueline Rabe Thomnas, Mark Pazniokas

©The Connecticut Mirror

With the flourish of a veto-proof margin, the House of Representatives voted October 26 to give final legislative passage to an overdue, bipartisan budget crafted without the direct involvement of Gov. Dannel P. Malloy.

After a concise and focused two-hour debate, the House voted 126 to 23 to send Malloy a $41.3 billion two-year spending plan and put Connecticut on the verge of ending a budget impasse that has stretched 118 days into the new fiscal year.

The Senate voted 33-3 just 10 hours earlier to approve the budget, also easily achieving the two-thirds majority that would be needed to override a veto. An override requires 24 votes in the Senate and 101 in the House.

Legislative leaders remained hopeful the Democratic governor, whose administration has been excluded from budget talks over the past three weeks, would sign the measure, which closes huge projected deficits with only modest cuts to municipal aid and no increases in income or sales tax rates.

Malloy would not speculate Wednesday, October 25, on whether he would sign the bill. His staff gave no hint after final passage.

"Since January, Gov. Malloy has been calling on the legislature to take action to adopt a balanced and responsible budget," said Kelly Donnelly, his spokeswoman. "We recognize that they believe that they have achieved this end and are now sending a budget to him for his consideration and we appreciate their work. At the same time, it is incumbent on the governor and his administration to carefully review this budget - a complete document of nearly 900 pages that was made available only a few minutes before it was called on the floor."

Malloy's administration said it already had found one serious flaw in the language of a complicated hospital-tax increase designed to leverage more federal Medicaid reimbursements. Legislative leaders say are they are reviewing the language and will make any necessary revisions in a supplementary bill.

An ideologically diverse mix of 10 Democrats and 13 Republicans voted against the budget, including the only member of the legislature running for governor, Rep. Prasad Srinivasan, R-Glastonbury.

Legislators said the compromise would stabilize the state's finances and its municipalities, making defeat unthinkable.

"You have to weigh the scale," said House Majority Leader Matt Ritter, D-Hartford. "We don't have alternatives. Right now we have no budget. We have no revenue coming in."

Ritter offered praise to the governor, but also deliver a warning of the consequences of continued impasse.

"Schools will close, libraries will close. I'm not saying this to scare people. It's true," Ritter said. "There's a moral obligation here to not let that happen."

"This budget is not perfect," said House Minority Leader Themis Klarides, R-Derby. "Does it do everything we need it to do? No way. But this budget is a start."

The budget relies on tax and fee hikes worth roughly $500 million per year for the biennium. It also would raid more than $175 million from energy conservation funds - which largely are supported by surcharges on consumers' utility bills - and would offer Connecticut's seventh amnesty program for tax delinquents since 1990.

The budget cuts deeply into operating funds for the University of Connecticut - but far less than a Republican-crafted budget would have one month ago.

It also does not shift a portion of skyrocketing teacher pension contributions onto cities and towns, as proposed by Malloy. But it does direct the governor to achieve unprecedented savings after the budget is in force - adding $114 million over two fiscal years combined to the already aggressive target Malloy proposed.

It also authorizes a $3.5 billion, two-year bond package. That program includes $80 million in borrowing across four years to assist homeowners dealing with crumbling concrete foundations and $40 million to renovate the XL Center in Hartford.

In the first year, the plan would boost General Fund spending by 4.9 percent over appropriations from the last fiscal year. But that growth is deceptive, because nearly $190 million of that involves extra payments to hospitals that would be more than offset by tax hikes on the industry and increased federal Medicaid payments. Ignoring the new hospital spending, growth is 3.8 percent, and much of that is driven by surging retirement benefit and other debt costs, which are largely fixed by contract.

Tax Hikes

The new plan does rely on revenue from tax and fee hikes worth $494 million this fiscal year and $535 million in 2018-19, or just over $1 billion for the biennium.

The largest increase, though, is the tax hike on hospitals, which the industry supports. That's because Connecticut would return the extra $344 million per year it would collect back to hospitals - and more - to qualify for increased federal Medicaid reimbursements. The arrangement would leave the state $137 million ahead in each of the two fiscal years.

If the hospital tax hike is not counted, the overall tax and fee increase is $150 million in the first year and $201 million in the second.

The budget also raises income taxes on middle class and working poor households by reducing tax credits.

Other tax and fee increases in the plan include:

A 45-cents per pack increase in the cigarette tax and a related increase on levies for snuff and other tobacco products.

$10 million to be raised in 2018-19 by reducing tax credits to be identified later by the legislature.

Restoration of an earlier proposal to tax fantasy sports betting, beginning in the 2018-19 fiscal year.

A 25-cent fee hike on Ridesharing services.

And a new $10 increase in motor vehicle registration fees to support state parks and other recreational sites in a program titled "Passport to Parks."

The new budget also orders reductions to the estate tax and expands income tax exemptions for retirement earnings in the second year.

The new budget also cancels previously approved tax cuts for insurance companies, other businesses and retired teachers that are collectively worth $33 million per year.

Present-day teachers also take a hit in the new budget. Their annual contributions to their pension fund grow from 6 to 7 percent of their salaries starting in January - a $775 yearly increase for the the average teacher and school administrator.

The teacher's increased contributions to their pension fund will quickly translate into a savings in the General Fund. The state will use those increased payments, $18 million this fiscal year and $38 million in 2018-19, to reduce the state's contribution to the pension fund by matching amounts.

Raiding Energy Funds

The budget would draw $87.5 million per year from three energy conservation programs:

$63.5 million from the Connecticut Energy Efficiency Fund.

$14 million from the Green Bank

$10 million from Connecticut's part of the Regional Greenhouse Gas Initiative, a nine-state coalition.

The first two of those funds get the bulk of their resources from surcharges on monthly utility bills.

Malloy and clean energy advocates particularly have balked at the Green Bank raid because it leverages an estimated $8 to $10 in private investments from every $1 utility customers pay into the program.

Solar Connecticut, which represents the solar industry, and HPACT, a contractor specializing in energy efficiency, said they would purse a lawsuit to stop even the scaled-back raids on the Green Bank and the Energy Efficiency Fund.

Connecticut also would offer its seventh amnesty program to tax delinquents since 1990.

GOP: Spending Reforms Make A Difference

The new budget sets stronger spending and bonding caps. Also, contracts affecting state employee unions no longer could be implemented without a vote of the legislature.

At the municipal level, the budget revises the prevailing wage and binding arbitration systems. Towns would have more flexibility to launch more publicly financed capital projects without having to pay union-level construction wages. And arbiters have more options when ruling on wage and other contract issues involving municipalities and their employees.

Rep. Rob Sampson, R-Wolcott, rejected the arguments of those who downplayed the tax hikes.

"Without going any further, that is an automatic 'no' vote for me," he said.

Rep. Sam Belsito, R-Tolland, said that, after enacting major tax hikes in 2011 and 2015, the legislature needs to focus harder on cutting expenditures.

Rep. Doug Dubitsky, R-Scotland, who also opposed the measure, said legislators were not given sufficient time to absorb a document that approaches 700 pages.

Town Aid Trimmed

The budget would cut the Education Cost Sharing Grant - the primary state grant that cities and towns receive to help run their schools - by $31.4 million this fiscal year, a 1.6 percent cut. However, next year, that money is almost entirely restored and distributed using an updated formula that more heavily favors the state's lowest-performing school districts.

The state's 30 lowest-performing districts and three other communities would be shielded from any cuts this year, and each of the remaining 136 towns are cut by 5 percent.

In the following fiscal year, however, $30.9 million in ECS funding would be restored and a new formula used to direct more of that money to towns that have higher concentrations of students from low-income families and less ability to raise enough local tax money to pay for their public schools.

The new budget also scales back non-education aid somewhat.

A 2015 plan to share sales tax receipts with cities and towns - as much as $300 million per year - is all but eliminated in this budget.

But lawmakers included a "municipal transition grant" worth $13 million this fiscal year and $15 million in 2018-19.

The budget also maintains a cap on motor vehicle property taxes for two more fiscal years, albeit at higher levels.

Lawmakers also authorized $40 million in new annual aid for Hartford to help the capital city avert bankruptcy.

Shielding The Rich?

The new budget would reduce the eligibility cutoff for the Husky health care program for poor adults with minor children from 150 percent of the federal poverty level to 133 percent.

Rep. Melissa Ziobron of East Haddam, ranking GOP representative on the Appropriations Committee, said leaders fought to avoid deep cuts to key priorities like Meals on Wheels and other programs for seniors, and subsidized child care for moderate-income families.

Rep. Toni Walker, D-New Haven, House chairwoman of the Appropriations Committee said, "The budget before us is not something we should celebrate, but something we should monitor."

Rep. Josh Elliott, D-Hamden, said the plan shields the wealthy while hurting those in need. "I think this is a budget that ultimately asks of everybody but those who can afford it the most," Elliott said. "It punishes the poor for being poor. It punishes the middle class for living in a society that doesn't protect them."

It will be debated again in February, when the 2018 session opens with the governor proposing revisions for the second year of the biennium.

The complete budget story originally appeared at CTMirror.org, the website of The Connecticut Mirror, an independent, non-profit news organization covering government, politics and public policy in the state.

Local Input

As of Friday, October 27,

The Newtown Bee had received comments from Rep JP Sredzinski and Senator Tony Hwang.

A release from Rep Sredzinski's office stated:

State Representative JP Sredzinski (R-112) voted to approve a bipartisan budget on Thursday as it passed the House of Representatives with a 126-23 veto-proof margin.

"In the end we had two choices - this compromise budget or the governor's dreadful executive order. This budget restores 95 percent of Monroe and Newtown's municipal aid and education funding, and also refuses the governor's proposal to transfer a third of the cost of teacher pensions onto municipalities," said Rep. Sredzinski. "I made a promise to do whatever it took to ensure this funding was saved and to avoid the pension cost shift, so my best option was to support this compromise budget in spite of certain elements I am still uncomfortable with. I count this as a small victory for our towns over Governor Malloy and I will resume the fight for Connecticut's future next session. This budget agreement is not the finish line; it's merely a hurdle in our race toward turning our state around.

"Anyone who watched this budget crisis unfold knows how hopeless our situation seemed for most of the year and sensed massive tax increases on the horizon," said Rep. Sredzinski. "For a while, it looked like tolls, sales tax hikes, cell phones taxes, taxes on seasonal homes, and supplemental property tax bills were all possible if not inevitable. The fact that none of these new taxes were implemented is an achievement, especially given the budget keeps funding for core government services like Care4Kids."

Rep. Sredzinski concluded by calling the passage of the compromise budget "the best option we had," saying, "Majority Democrats essentially set our fiscal house on fire by passing the SEBAC union agreement. Rather than stand back and watch the house burn down, I grabbed the nearest hose I could find and tried to put it out. We still have a lot of work to do but the state will truly be in better shape when this budget becomes law."

The governor will make his decision on whether to veto the budget bill or not in the coming weeks, although there is optimism that a veto could be overridden in both chambers.

The following statement was issued October 26 from the office of State Senator Tony Hwang:

State Senator Tony Hwang was encouraged and relieved upon the October 25 release of the bipartisan state budget bill which will restore the draconian funding cuts to Newtown that were made in Gov. Dannel P. Malloy's Executive Order.

The budget bill will not redistribute the state's teacher's pension obligation to local governments. It also implements key structural limits on how state taxpayer money is spent.

"Thank goodness, Newtown will be held relatively harmless," Sen. Hwang said. "This bipartisan compromise protects municipal and education aid to Newtown, and that's very good news for property taxpayers, students, and educators. This budget will not place the state's teacher pension obligation burdens onto towns and local taxpayers."

Under the bipartisan proposed budget, Newtown's municipal aid grant will now be $7,430,748 in Fiscal Year 2018 and $7,262,165 in Fiscal Year 2019, which includes newly allocated educational funding of $4,649,247 in Fiscal Year 2018 and $4,756,332 in Fiscal Year 2019 instead of the zero ($0) proposed by Gov. Malloy's Executive Order.

If the governor vetoes the bill, Sen. Hwang and lawmakers have said they would attempt an override of the veto.