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Senate Narrowly Passes Two-Year Budget As Three Democrats Vote With GOP

By CHRISTOPHER KEATING

June 04, 2013

HARTFORD — The Senate granted final legislative approval Monday night to a two-year, $44 billion spending plan that extends tax increases, cuts college scholarships and increases spending for a variety of programs.

Gov. Dannel P. Malloy and Democrats hailed the balanced budget for providing billions of dollars for their core priorities of public education, municipal aid, and safety net services. The budget provides a record-breaking $3 billion to cities and towns in the next fiscal year and $3.1 billion in the second year, including a restoration of money for school buses for both public and private schools that had been threatened with millions of dollars in cuts.

Funding was increased for magnet schools, vocational-agricultural programs, adult education, breakfast programs, school-based health clinics, and town road improvements. An additional $16 million was set aside for mental health programs after the shootings of 20 children and six women Dec. 14 at Sandy Hook Elementary School in Newtown.

"At every step, this budget is a responsible one that meets the needs of the state in difficult economic times,'' said Senate Majority Leader Martin Looney, a New Haven Democrat. "It is responsible, evenhanded, and does prioritize preservation of social services, support for education, support for health care. Those needs are met with this budget.''

After nearly seven hours of debate, the Senate narrowly approved the budget 19 to 17 at about 9:45 p.m. Three Democrats — Joan Hartley of Waterbury, Paul Doyle of Wethersfield and Gayle Slossberg of Milford — joined with Republicans opposing the budget.

Hartley and Doyle had been among the leaders in opposing Malloy's plans to redefine the state's mandatory spending cap, which prompted Democrats to come up with a way to try to keep the budget under the cap.

Republicans countered that both spending and taxes are too high and maintained that the state is headed in the wrong direction with a gimmick-filled budget.

"This reminds me of a movie scene in 'Planes, Trains & Automobiles' when John Candy and Steve Martin are going down the highway,'' said Sen. Robert Kane, referring to the main actors in the 1987 comedy about a trip from New York City to Chicago. "They were told: You're going the wrong way! You're going the wrong way! They were literally on the wrong side of the road until two trucks came down the road and scared the devil out of them.''

Kane and other Republicans said that Connecticut already has the highest per capita debt in the nation, along with the highest energy costs and highest taxes by some measures.

"Yet we continue to go down this way,'' Kane said. "The spending cap is like a yellow, flashing light that says slow down. We're blowing right through it at 80 miles per hour. We can't continue this spending spree.''

Sen. Joseph Markley, a Southington Republican, picked up on the transportation theme.

"Not only have we not changed direction, but we have not taken our foot off the accelerator,'' Markley said. "The faster we're going, the more suffering there is going to be. ... I think this budget continues in the wrong direction.''

One of the most controversial items was the decision by Malloy and Democrats to move $6.4 billion in federal money "off budget'' over the next two years and not count it toward the state's spending cap. As such, the legislature authorized a budget of about $37.6 billion over two years. When the $6.4 billion in "off budget'' federal money is added in, the total amount of money being spent over the next two years will be $44 billion.

Senate President Pro Tem Donald Williams, Malloy and other Democrats said that Connecticut was the only state in the nation with a spending cap that counted Medicaid funding in that way.

"This is a common-sense change for Connecticut that allows our taxpayers to get their fair share of federal funds,'' Williams said Monday night. "We were counting federal dollars, and every other state was not. … Connecticut stands alone in punishing our taxpayers from getting our fair share.''

While saying that "anyone can file a lawsuit,'' Williams said the state would defeat any legal challenges to the changes in the spending cap.

When asked why the state did not switch its Medicaid accounting system earlier if it is such a good idea, Williams responded, "That's a really good question. … It wasn't until this session that we got research from statewide legislative organizations that spelled out clearly to us that Connecticut was standing alone in how they account for Medicaid.''

But Senate Republican leader John McKinney of Fairfield described the financial maneuvers as "one of the most ridiculous shell games ever – not just in Connecticut, but ever.''

The changes are "too cute by half,'' McKinney said on the Senate floor. "Why don't we just be open and honest in what we're going to do? … How that is legal and constitutional is mind-boggling. … You can't make this stuff up.''

He added, "We also were told that the era of gimmicks was over. … Problem solved? No. Kick the can down the road? Yes. … There is nothing about this scheme that is honest and transparent with the people of Connecticut.''

Malloy's budget director, Ben Barnes, said that the financial changes are complicated and represent a new way of accounting for the state.

"I'm not going to argue that we've cut spending by billions of dollars,'' Barnes said. "We haven't.''

Sen. Toni Harp, a New Haven Democrat, said the state has been operating under a statutory spending cap that was passed by the legislature, rather than a constitutional spending cap that was passed by the voters in 1992 and not implemented by the legislature.

Another controversial item is the legalization of keno, which would generate an estimated $27 million for state coffers in the second year of the two-year budget. The game is legal in New York, Massachusetts and Rhode Island and has been considered in Connecticut in the past.

The Native American tribes that operate two casinos in southeastern Connecticut have long maintained that keno is a casino game. Former Gov. M. Jodi Rell argued that keno is a lottery game that could be enacted unilaterally by the state without an agreement with the tribes. But the Malloy administration has already held preliminary talks with the tribes, and the budget paves the way for a future agreement in which the tribes would each receive up to 12.5 percent of the gross keno revenues – which is the amount remaining after the winning players are paid.

"Let me tell you, gambling is the form of a tax, and it is a regressive tax that hurts people more at low-income levels than at upper-income levels,'' McKinney said. "Maybe if you ask the hospitals, they'll say this is a tax increase also.''

Another controversial item is a plan to cut more than $500 million from the state's hospitals. But Malloy and the Democrats said that the hospitals would receive additional money from serving additional patients with insurance through President Barack Obama's new health care law.

The cuts had caused controversy, but House Speaker J. Brendan Sharkey said he had advised the hospitals to "ratchet down the rhetoric on this.''

The measure also cuts college scholarships by $6.4 million over two years as part of an overall consolidation of the state's scholarships for private and public universities. For years, separate programs were established for public universities and for in-state private colleges including Quinnipiac, Fairfield, Trinity and Wesleyan.

Tax Increases Or Not?

Malloy and Democrats said repeatedly that the budget includes no new taxes.

But Republicans argued that consumers will be paying more than they had previously for gasoline and other items.

The gross receipts tax on gasoline is scheduled to increase July 1 under a previously approved schedule, which would translate into an estimated 3 to 4 cents per gallon under current prices. That would generate an estimated $60 million a year for the state under the two-pronged gasoline tax. The tax collections will increase as the wholesale price of gasoline increases. The gross receipts tax, which currently has an effective rate of 7.53 percent of the wholesale price, will increase to 8.81 percent on July 1. The increases were set in 2005 as part of a long-term schedule when Republican M. Jodi Rell was governor, and the new budget does not alter that schedule.

A Republican amendment to block the increase was rejected Monday night on a party line vote as it also tried to reduce the money for the earned income tax credit.

In addition, the budget calls for continuing a 20 percent surcharge on the corporate profits tax, which would generate an expected $118 million over two years. The legislature also voted to extend a tax on electricity generators for three months, which is shorter than Malloy's original proposal for a two-year extension. The heavily lobbied tax would generate an expected $17.5 million and would be phased out by Oct. 1.

Another tax — a complicated levy involving insurance premiums — would generate $54 million over the next two years.

"This budget breaks so many promises – no new taxes – but there is an increase in the gas tax,'' said Sen. Toni Boucher, a Wilton Republican. "It's not under the spending cap. The ethical thing to do would be to go back to the public to change the rules. … This budget maintains that it is GAAP-compliant, but it is not. … It raids the banking fund. It raids the tobacco fund. It raids the probate courts. … This budget is very disappointing.''

"The new state budget is a clear win for towns and cities and their local property taxpayers,'' said James Finley, the chief executive officer of the Connecticut Conference of Municipalities. "CCM commends the legislature and the governor for listening to the concerns of municipalities across our state.''