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Senate Seals State Budget

Hard-Fought Plan Goes Easy On Taxes

June 26, 2007
By CHRISTOPHER KEATING, Capitol Bureau Chief

Finally.

After battling over the state budget since February, the Senate granted final legislative approval Monday to a two-year, $36 billion plan that raises the levy on cigarettes, but makes no changes in other major tax rates.

The Senate vote was 33-1 for the budget, which was approved early Saturday by the House and which includes huge increases for health care and education, including higher Medicaid reimbursements for hospitals, doctors, dentists and clinics.

Both chambers still must approve the bonding package, which includes projects such as public-school expansions and library additions. The bonding vote could occur later this week in the House but will spill over into July for the Senate.

All sides said they gave up a lot to reach a middle ground.

"It's not a Republican budget. It's not a Democratic budget," said Sen. John McKinney of Fairfield, the new Senate Republican leader. "It's a compromise."

Sen. Sam Caligiuri, a freshman Republican from Waterbury who served briefly as the city's acting mayor, said he voted `no' because the legislature had refused to cut gasoline taxes, and because he thinks that the 8.6 percent spending increase will be unsustainable.

"I used my vote to make that point today," Caligiuri said.

Besides rejecting a Republican call to eliminate the 25-cents-per-gallon gas tax through Labor Day, the legislature also blocked a proposal to cap the gross receipts tax for petroleum products. As a result, a previously approved increase will take effect July 1 and add about two cents per gallon of gasoline.

One of the biggest increases came for Medicaid reimbursements for everyone from doctors and dentists to optometrists. The state would spend an additional $27 million in the first year to provide a 50 percent increase in the reimbursement rates for doctors - the first increase since 1989. Hospitals would receive an additional $46 million in the first year and $72 million in the second year in higher Medicaid payments.

Hartford is one of the new budget's biggest winners. The capital will receive $232.9 million in total so-called statutory formula grants next year, up from $220 million this year. West Hartford will receive $18.79 million, up from $14.77 million, and Simsbury will get $5.76 million, up from $3.85 million.

The budget also includes a one-year extension of the controversial "conveyance tax" on real estate sales. The tax has led to a four-year battle between real estate agents and the Connecticut Conference of Municipalities, which represents cities and towns. The group was delighted when the Democratic-controlled finance committee voted in mid-April to make the conveyance-tax increase permanent, but the final budget compromise simply extends the increase until June 30, 2008.

In a move originally described as temporary, the tax was increased to 0.25 percent from 0.11 percent during the 2003 fiscal crisis. Democratic leaders have argued that the tax had not hurt the real estate market, so there was no reason to lower the rate.

In another controversy, lawmakers are still debating which agency should oversee a contract to study the University of Connecticut Health Center's proposal to build a new, $495 million hospital to replace John Dempsey Hospital on its Farmington campus.

Many legislators were stunned late Friday when they saw in Section 90 of the budget bill, buried on page 115 of the161-page document, that the contract oversight of the study had been taken from the state Office of Health Care Access and given to the Office of Legislative Management. The change gives the legislature more oversight.

Sen. Joan Hartley, a Waterbury Democrat who co-chairs the higher education committee, described the move as a "significant change" that needs to be corrected. She called for the legislature to insert the issue into the annual bond package and "restore the language as it was."

The study itself would be conducted by the Connecticut Academy of Science and Engineering, and the debate now is over which agency will oversee that contract. Rep. Denise Merrill, co-chairwoman of the budget-writing appropriations committee, said having the health care access office oversee the study would be a conflict of interest because that office would eventually have to grant a certificate of need if the $495 million UConn plan is approved.