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Malloy budget plan out of the gate

By JC Reindl

Publication: The Day

Published April 22. 2011 4:00AM
Tax, spending portions of governor's $40.2B proposal clear key committees

Hartford - Gov. Dannel P. Malloy's newly amended budget plan passed through two committees of the state legislature Thursday, a rare feat for a governor before Good Friday.

The finance committee voted 32-20 to adopt the tax portion of the Democratic governor's two-year, $40.2 billion budget. Two Democrats, Sen. Ed Meyer of Guilford and Rep. Charlie Stallworth of Bridgeport, broke party lines in voting against the plan that would raise taxes by $1.4 billion in the fiscal year starting July 1.

Ninety minutes later, members of the appropriations committee passed the spending portion of the budget, ultimately voting 33-21, with three Democrats in opposition: Sen. Joan Hartley, Rep. Kim Fawcett and Rep. Linda Schofield.

"Is it the best budget that possibly could come out of here? No," said appropriations member Rep. Ernest Hewett, D-New London, who voted for the plan. "But with a $3.3 billion deficit, I think this was the best we could do at this time."

The committee meetings occurred almost simultaneously on the same floor of the state Capitol complex - yet another unusual occurrence in this year's uncharacteristically speedy budget process.

Malloy is the first governor in two decades to serve with a House and Senate controlled by members of his same political party. Seldom do governors and lawmakers reach general agreement on a budget this early in the legislative session.

Despite being outnumbered, Republicans spoke at length on Thursday in both committee meetings to criticize the budget as hurtful to taxpayers and businesses, and counter to Connecticut's long-term economic interests.

"We can't be saying that we're open for business and then increase the corporate tax surcharge by 100 percent, from 10 percent to 20 percent," said L. Scott Frantz, R-Greenwich. "Even if doesn't affect you, it sends out a message. It sends out a message to the marketplace that Connecticut may in fact have the door partially open to business, but is it really open for business?"

The two portions of the biennial budget now go to the House and Senate chambers of the General Assembly for action after the holiday weekend.

But the attention is now back on the executive branch, as Malloy has yet to gain $1 billion in cost-savings and concessions from state workers. The governor said earlier that the legislature could still pass a final budget and he could still sign it using place holders for the expected concessions.

Republican leaders have criticized the governor for celebrating an early budget deal without the labor concessions in hand.

New, higher taxes

The budget in its current shape would introduce a number of new and higher taxes. If enacted, consumers could expect to pay more for cigarettes, alcohol, gasoline, cosmetic surgery, manicures, cremations, rental cars, limo service, airport valets, pet grooming and a day at the spa.

Malloy dropped plans to tax other things as part of his agreement with legislators. Those items included haircuts, carwashes, boat services (cleaning, storage, repair, tow), coupon discount rates, and clothing and shoes priced under $50.

The budget would also raise the sales-tax rate to 6.35 percent from 6 percent for most retail items. It expands income tax brackets from three to eight, and establishes a higher top rate of 6.7 percent. And it creates a "luxury" tax for pricey cars, boats, jewelry and clothing, although at a lower rate than first proposed.

The $500 property tax credit has been cut back to $300 for most households. Malloy initially sought to eliminate the credit, but said he changed his mind after citizens voiced concerns during his statewide listening tour on the budget.

The budget also creates an earned income tax credit for low-income workers.

Democratic unity

Republicans in both committees tried unsuccessfully Thursday to replace the tax and spending portions of the plan with parts from the GOP's own "no tax increase" budget. The GOP budget calls for significant cuts to state government and some social services programs but would maintain current funding levels to cities and towns.

"The taxpayer has had it. They have had enough," said Sen. Sean Williams, R-Watertown, ranking Republican on the Finance, Revenue and Bonding Committee. "Nobody is looking at Connecticut as a good place to do business after we pass [the governor's budget]... all the people we know, our neighbors, friends and family. They can't afford it."

But most Democrats stuck together in the final votes.

"The budget that is on the table is a difficult one, it is a balanced one, it addresses the needs of the people in the state of Connecticut with a vision of going forward and encouraging job growth," said Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the finance committee.

All Democratic committee members from the New London area voted with their party.

"I ultimately would like to have seen us trim back a bit more on spending and taxes, but I'm very pleased we were able to beat back the proposed taxes on the marine industry" said Rep. Andrew Maynard, D-Stonington, an appropriations committee member. "And I was pleased that we were able to restore the bulk of the property tax credit. So a number of the most objectionable things were removed."

State Rep. Diane Urban, D-North Stonington, was also glad to see boating taxes removed from the plan. She complimented Malloy for shifting the state to Generally Accepted Accounting Principles, thus avoiding any budgetary "smoke screens."

Sen. Edith Prague, D-Columbia, an appropriations committee vice-chair, said she approves of the budget plan and is happy that Malloy opted to reduce the property tax credit rather than eliminate it.

"I have to give the governor credit, he listened to the people who complained about that," Prague said. "Nobody likes taxes, but that's the way it is. They're not as bad on the middle class as we thought they might be."

Meyer, the Senate Democrat who voted against the budget's tax portion, said he couldn't support a plan that continues longevity bonuses for some state workers, pension payouts at age 50 for others, and a top-heavy managerial structure in several state agencies, among other reasons.

j.reindl@theday.com

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What else does the budget plan do:

* Creates an earned income tax credit for the state's low-income workers;

* Lowers the exemption level on inheritance and estate taxes to $2 million from $3.5 million;

* Raises cigarette tax from $3 per pack to $3.40 per pack;

* Increases sales tax to 6.35 on most retail purchases;

* Raises gasoline tax by 3 cents per gallon.

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