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Malloy To Offer No-Increase Budget

By CHRISTOPHER KEATING

January 25, 2011

HARTFORD — Gov. Dannel P. Malloy said Tuesday that the state budget he unveils next month will fully fund state pensions and not rely on borrowing money to pay operating expenses — two departures from recent years.

He also said he would steer clear of early-retirement plans, a device used in recent years to obtain short-term savings by allowing the highest-salaried and most-veteran state employees to leave public service. Those plans have been criticized for increasing long-term costs as state employees receive an incentive to retire by receiving increased pensions.

Malloy also intends to keep spending at or below this year's level in a trend of tight budgets at the state Capitol. This year's budget, for example, increased by about 1 percent — far below the annual double-digit increases in the 1980s, peaking at 14.3 percent in fiscal 1988.

After numerous discussions with his budget team in recent weeks, Malloy settled on his fiscal framework over the weekend and announced it Tuesday to his commissioners at the Capitol.

The state faces a projected deficit of $3.5 billion for the fiscal year that starts in July — a huge percentage of a $19 billion budget. Malloy is expected to propose both tax increases and spending cuts to balance the largest budget gap in recent state history.

In another part of his framework, Malloy said, the state will fund its pension obligations in full on an annual basis — something not done in the past two years.

To accomplish his goals, Malloy will propose consolidating various state agencies, although details were not revealed Tuesday. He will present those details in an address to the legislature Feb. 16.

"I have never hidden my desire to see a fair amount of consolidation in state government,'' Malloy said. "I think this first budget that we present, as well as some of the ideas that are behind it, will make it clear that it is our intention to consolidate.''

Also Tuesday, Republican legislators released a "common sense'' agenda calling for sharp reductions in spending over the next two years, including a 10 percent cut in the salaries of all legislators and an increase in health care co-payments for legislators and their staffs. For the same period, the Republicans also called for freezing the salaries of state employees and cutting the salaries of all commissioners and deputy commissioners by 10 percent.

In addition, the Republicans proposed reducing the number of state agencies from 43 to 11, resurrecting an idea that has been repeatedly rejected by the Democratic-controlled legislature.

Malloy said several times that he had not yet seen the Republican proposals and declined to comment in detail.

When asked by a reporter if he would take a symbolic pay cut from his $150,000 salary, Malloy said he had not made any decisions on that yet.

Overall, the state budget is $19 billion in the current fiscal year, and it is expected to be $19 billion in the next fiscal year. However, in the complicated budgeting system, Malloy is proposing to cut $2 billion from the "current services'' budget, which includes inflation and built-in wage adjustments even if the state does not expand any programs.

"We will not spend more money on an operating budget basis than we spent this year,'' Malloy said.

He added that "it's fair to say'' that the budget could even decrease.

Concerning borrowing money for operating expenses, Malloy said that not only would he not propose any borrowing in his budget proposal, but he would veto any budget assembled by the legislature that does so — as has been done in recent years.

Shortly before Malloy's comments Tuesday, Republicans held a news conference to call for cutting the state's workforce by 5 percent and reducing the number of managers to be more in line with private companies.

One idea their plan did not include — a tax increase.

House Republican leader Lawrence Cafero and his counterpart in the state Senate, John McKinney, did not rule out raising taxes. But both leaders said the conversation about how to deal with the state's budget crisis must begin with reducing the scope and size of state government.

"We believe the level of taxes we have right now [is] certainly sufficient and, in some cases, too great,'' McKinney said.

As part of the budget deliberations, Malloy is studying the state's tax exemptions, including a wide variety of items that have been placed into state law as nontaxable.

In a budget forum at the state Capitol on Tuesday, University of Connecticut law school Professor Richard Pomp said the state could receive $400 million annually by enacting a 6 percent sales tax on food. Only about 20 states, including Connecticut, provide the exemption. In an attempt to provide tax relief for the poor, the state has enacted an across-the-board exemption on food that actually benefits affluent residents throughout the state, he said.

"You can deal with the root causes of poverty with some of that $400 million,'' Pomp said. "We think it's our sacrosanct right not to buy taxable food.''

Courant staff writer Daniela Altimari contributed to this story.