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Hartford - A path to let the energy-generation tax sunset was set in motion on Tuesday by the Finance, Revenue and Bonding Committee.
The committee voted 33 in favor and 17 against, with four members absent, to authorize $1.5 billion in general obligation bonds for fiscal year 2014 and $1.5 billion to be used in fiscal year 2015. The bond authorizations are for infrastructure improvements and upgrades to various state agencies.
But within the bond bill was a proposal to reorganize the repayment schedule for economic recovery notes in order to have more cash available for the state and allow the energy-generation tax to sunset.
"Due to that reorganization, we have the opportunity to save $76 million in the next two years, which just happens to match a number that has been floating around this building, quite frankly the generator tax," said state Sen. Andrea Stillman, D-Waterford.
In Gov. Dannel P. Malloy's biennium budget, he proposed refinancing the economic recovery notes bonded in 2009 to fund a general fund deficit under then-Gov. M. Jodi Rell. The current plan is to pay off the remaining $625 million from the economic recovery notes over three years, which would mean paying $208.4 million in fiscal years 2014, 2015 and 2016.
Malloy proposed spreading the repayment over five years instead of three.
This would free up some cash in the immediate biennium and increase payments in future years. The governor's proposal would cost the state and essentially taxpayers $30.3 million more in debt service payments over time because of growing interest.
The finance committee is proposing the state pay only $12 million in fiscal years 2014 and 2015 and pay $215 million in fiscal years 2016, 2017 and 2018. This would cost the state and taxpayers $43.8 million more in debt service payments than the current plan. The notes would cost $669 million instead of $625.2 million.
The committee's proposal costs the state $13.5 million more than the governor's proposal did and frees up $46.5 million in cash for both fiscal years 2014 and 2015.
To raise the remaining $30 million in cash for fiscal years 2014 and 2015, which would be needed to let the energy-generation tax expire, the committee proposed reorganizing the payment schedule for Generally Accepted Accounting Principles (GAAP) bonds.
Under GAAP, the state's budget deficit is about $1.2 billion for fiscal year 2013. To close the deficit, the governor proposed paying down $447 million of the debt over 15 years, at a rate of about $30 million a year. He also proposed borrowing the remaining $750 million and paying that back along with $186 million in interest over time.
The committee's proposal would push back the payment of $30 million a year to fiscal year 2016. There would be no payment toward GAAP in fiscal years 2014 and 2015, which would provide $30 million in cash for each of those years. The $60 million would be spread over the remaining 13 years, which run through fiscal year 2028.
In the end, the final GAAP price tag would be the same under the governor's proposal and under the committee's proposal, according to the Office of Fiscal Analysis. It would cost the state about $1.4 billion to pay for the $1.2 billion budget deficit under both of these plans.
These changes could permit the energy-generating tax to sunset as scheduled. The tax amounts to about $76 million a year.
Kevin Hennessy, director of government affairs for New England for Dominion, said company members have been speaking with Stillman and other legislators frequently.
"We agree that the tax should expire; it's a negative tax from a policy standpoint, it's a production tax and it harms consumers," Hennessy said. "We are trying to reduce electric rates, we don't want to tax the production of electricity."
Stillman said it was the co-chairs of the committee - state Sen. John Fonfara, D-Hartford, and state Rep. Patricia Widlitz, D-Guilford - who suggested refining the governor's proposal.
"I think it also sends a message that there are other ways to do this, not just to tax an entity," Stillman said.
Previously, Dominion did not pass the tax onto consumers, Stillman said. But at this point, electricity rates will increase if the tax does not expire, she said.