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Democrats' Budget Vote Nears; Rell Likely To Veto

By CHRISTOPHER KEATING

June 23, 2009

After months of deliberations, Democratic legislators are finally getting ready to vote as soon as Thursday on a budget that would raise taxes by an estimated $2.8 billion over two years.

But major issues remain unresolved, and the entire package faces a likely veto by Republican Gov. M. Jodi Rell.

Bipartisan talks have stalemated and completely broken off. Each side blames the other. With one week left before the fiscal year ends on June 30, the chances of the state's starting the new fiscal year without a budget are increasing each day.

"To get this done, we're going to have to make cuts that we really don't want to do, and the governor is going to have to stop drawing lines in the sand," said Derek Slap, a spokesman for the Senate Democrats.

Rell has refused to discuss tax increases until she is convinced that the legislature has cut the $38 billion, two-year budget as much as possible.

"The governor has said there will be no further budget discussions until the Democrats vote on a budget proposal," said Rich Harris, Rell's deputy spokesman. "The legislature has a job to do: pass a budget. It's past time that they did it."

The Democrats have sliced nearly $500 million in proposed tax increases since April in an attempt to reduce the impact on consumers and businesses.

"There are not going to be changes in the sales-tax rate or the exemptions," Slap said Monday. "A sales-tax increase is not in it."

Here are five key issues to watch in the battle over spending and taxes this week:

1. Income Taxes

Democrats have been pushing for years for a more progressive income tax, although Republicans note that the richest residents already pay a large percentage of the tax. The Democrats' latest proposal would increase income taxes for couples earning at least $500,000 a year, but Senate President Pro Tem Donald Williams said that the precise rates are still being decided. Currently, the top income-tax rate is 5 percent.

2. Estate Tax

Democrats have called for raising the estate tax, a tax that survivors of the deceased pay when an estate is transferred. Only survivors of those who die with an estate of more than $2 million are subject to the tax. The proposal calls for raising the tax on the state's richest residents by 30 percent. The governor says that more cuts are necessary before any discussion of increases in the estate tax, or any tax, can begin.

3. Tax Surcharge On Corporate Profits

The finance committee has proposed a new, 30 percent surcharge on corporate profits. Legislators are battling over whether that increase will be dropped to 25 percent or 20 percent. The Connecticut Business and Industry Association has been lobbying to blunt any corporate tax increases.

4. Nonprofits

Many nonprofit agencies providing state services are alarmed that they will be unable to meet their payrolls if state funding is restricted on July 1, the beginning of the new fiscal year. Nearly 54 percent of the members of the Connecticut Community Providers Association say they have cash reserves to cover only two payroll periods, and almost 25 percent say they could cover only one payroll period. "Community-based human service providers have been asked to go without state funding increases for three years," said Terry Edelstein, the chief executive of the providers' association. "This is forcing providers to make cuts that are having a direct impact on clients and their families." Slap said Monday that the Democratic plan will maintain the funding for the nonprofit groups at their current level, meaning a zero percent increase.

5. Nursing Homes

Some cash-strapped nursing homes are in danger of closing if they fail to receive proper funding from the state. The industry has been teeter-tottering, and homes in Connecticut have been closing. Nursing-home owners and unionized employees, who are often at odds, have both been urging lawmakers to avoid deep cuts. The Democrats are rejecting a 1 percent cut to Medicaid providers that had been proposed by Rell.