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News of a tentative state budget deal began leaking out in news report Friday, just as most Connecticut residents were getting ready for the three-day holiday weekend. If the timing meant fewer people heard of the deal, and it surely did, that was fortuitous for Democrats, because there is not much to brag about.
On Tuesday, Gov. Dannel P. Malloy confirmed the broad outlines of a budget agreement are in place. Multiple news reports, citing sources, placed spending at $21.5 billion for the fiscal year that starts July 1, about $22.3 billion for the following year. Expenditures would grow 5 percent next year, and another 4 percent the following year.
While the details are different, the proposed spending is nearly identical to the recommendations Gov. Malloy presented to the legislature on Feb. 6. Given that the Democrats control the governor's chair and enjoy big majorities in the House and Senate that should probably not be too great of a surprise. Republicans are little more than observers, tossing the occasional verbal rotten fruit at the opposition.
This is largely a status quo budget. There was never any discussion of asking labor for further concessions, a recognition that, protected by no-layoff provisions and finally seeing pay raises after a long salary freeze, state workers would have no incentive to reopen contracts. Spending is not driven by new programs, but by surging social and health services costs, contractual obligations and inflationary pressures.
As we've noted previously, the stage is set for a vigorous debate as Connecticut moves toward the gubernatorial election year 2014. What ideas will candidates have for addressing the state's enormous unfunded pension liabilities? Do the health and retirement benefits provided state workers need to be brought in line with private sector offerings? Should the state expand the role of private, nonprofit agencies in providing human services? Are major changes in tax policy called for?
The budget deal is getting much attention about a change to how numbers are fit into the constitutional budget cap, at least when it comes to Medicaid. Connecticut has always counted what it spends on Medicaid against the spending gap, even though much of that spending is reimbursed. Democrats propose counting against the cap only those Medicaid expenditures the federal government does not reimburse, reducing by about $1 billion spending counted against the cap, The Connecticut Mirror reports. This would eliminate the need to get legislative approval to exceed the cap, as Gov. Malloy had earlier sought.
Republicans are howling about the change, but it makes sense. Many other states only count as Medicaid spending the amount not reimbursed federally.
It was good to hear word that the budget would at least moderate the tax on electric generation plants, a tax that has hit Millstone Power Station particularly hard and which was supposed to expire June 30. Gov. Malloy, hoping to generate $70 million per year, called for extending it through mid-2015. Because of an effort led by southeastern Connecticut legislators, the tax will extend only through mid-2014 and the annual toll on power plants would drop to $30 million, The Mirror reported.
Also on the plus side, municipal aid is largely preserved.
There is much not to like. A scheduled gas tax hike - adding about 3 cents per gallon - would go into effect July 1 with the money diverted from transportation to help fund other state spending. The state should spend the gas tax on the transportation system.
The budget deal would also reportedly tap much of the $212 million surplus projected for the current fiscal year, rather than placing it in the rainy day fund. And the spending plan extends other business taxes set to expire.
This all amounts to tweaking. A much bigger discussion about fundamental change and durable solutions to deal with the long-term fiscal challenges confronting the state awaits.