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House, Senate Approve $19 Billion Budget Deal

Christopher Keating

May 06, 2010

The state Senate and the House of Representatives both approved a $19 billion budget compromise Wednesday night that increases spending by 0.9 percent, borrows nearly $1 billion for operating expenses and introduces no new taxes in an election year.

The votes represented a major compromise with Republican Gov. M. Jodi Rell after about 18 months of sharp, partisan clashes as the state faced its worst fiscal crisis in decades.

With the legislature racing toward a mandated midnight deadline, the House voted 93-57 at 11:50 p.m. on a largely party line vote to approve the 245-page deal.

Earlier Wednesday, after nearly four hours of debate, the Senate voted 19-16 for a budget that for the first time crossed the $19 billion threshold.

All 12 Republican senators voted against the budget, along with four Democrats: Sens. Joan Hartley of Waterbury, Edward Meyer of Guilford, Donald DeFronzo of New Britain and Andrew Maynard of Stonington.

Lawmakers had been wrangling before Rell and Democratic legislators finally reached a deal on a package that funds everything from dental care for prison inmates to annual subsidies for the University of Connecticut and its financially troubled health center.

"We are making the best of a bad economic situation here in Connecticut" and around the country, said Senate President Pro Tem Donald Williams, D- Brooklyn. "There are no cuts in aid to cities and towns that would lead to property tax increases. ... It's not pretty. States across the country are grappling with the same problems."

But in the House, Republican leader Larry Cafero said, "This is no change. It is business as usual."

The projected budget deficit of $700 million for fiscal 2011, which starts July 1, will be closed through a combination of one-shot maneuvers that include about $366 million from an extension of federal stimulus money, tapping various funds to help the deficit-ridden general fund and deferring a payment of $100 million into the state pension fund.

The measure also calls for borrowing nearly $1 billion to balance the budget, lower than an original plan last year to borrow $1.3 billion. The budget increase of 0.9 percent is among the lowest in state history, but Republicans said the total should have been lower because of the huge economic downturn that has prompted slashed budgets and large layoffs in the private sector.

The budget is also noteworthy for much-debated items it does not include: no early retirement program for state employees, no legalization of the keno gambling game, no major cuts in state aid to cities and towns, no privatization of Bradley International Airport in Windsor Locks.

The bill makes no changes in the state income tax, which was raised last year for millionaires, or in the cigarette tax, boosted last year by 50 percent.

Senate Republican leader John McKinney of Fairfield said that, fundamentally, the state budget should not have increased at all because the state is still projecting a deficit of more than $3 billion in Fiscal 2012 after a new governor takes office. The bill lacks consolidations, privatization and restructurings that had been sought by the GOP.

"We are still left with a massive, structural hole in 2012," McKinney said. "It is, in many ways, business as usual. ... We had all talked about consolidating state agencies. None of that is in here. We make no real attempt to streamline government. ... Why would we not think about doing that?"

"It really doesn't address the deficit that we have projected in fiscal years 2012 and 2013," said Sen. Toni Harp, D- New Haven, who is co-chairwoman of the budget-writing appropriations committee. "We're hoping for an immediate and abrupt turnaround in our economy" to generate money in the future.

The revised revenue estimates by the legislature's nonpartisan fiscal office projected Wednesday that the state will collect $6.68 billion from the income tax and $3.16 billion through the sales tax in Fiscal 2011. In addition, corporations will pay an estimated $663 million, while smokers will contribute $386.5 million from cigarette taxes.

The two Indian casinos in southeastern Connecticut will generate an estimated $365 million for the state's share of slot-machine revenues, a sharp drop from $430 million at the peak of the economic boom. The state's deficits owe much to huge drops in the income and sales taxes, but the latest estimates are high enough to balance the budget for the next fiscal year.

With fiscal maneuvers and new revenue estimates, the state is projected to have a surplus in the current year, Fiscal 2010, of $139 million.

"This budget is one of hope — hope that the economy turns around," said Sen. Dan Debicella, the ranking Senate Republican on the budget-writing committee. "We are not making any of the fundamental reforms that we have been talking about to actually save money, shrink the size of government and make government smarter. ... In football terms, we are punting this problem to the next governor. We are punting it to the next legislature."

In an unusual joint statement for a group that has sometimes clashed in the past, Rell joined with the legislature's two highest-ranking Democrats — House Speaker Christopher Donovan of Meriden and Williams — to praise the budget.

"For the last few weeks, we have worked together in a respectful and productive manner to address Connecticut's unprecedented fiscal challenges," they said. "We are pleased to announce that we have reached agreement on a revised budget that fully balances the budget without raising taxes, cutting municipal aid or harming needed social services."

Despite the agreement, Rell's office announced that she would not be delivering the traditional end-of-the-session speech in the historic Hall of the House. Republican legislators publicly broke with Rell last week when they announced that they would not participate in any further budget talks because their ideas had been summarily rejected.

The plan calls for borrowing $955 million through the sale of AAA-rated revenue bonds at a 3.1 percent interest rate, which would be paid back by the state over eight years at a rate of $136 million per year.

The bonds will be paid back each year through money from "stranded costs" on electric bills that are paid by everyone throughout the state — including $77 million from customers of Connecticut Light & Power Co., $28 million from customers of United Illuminating and $2.3 million from those served by municipal electricity authorities.