Hartford — The Finance, Revenue and Bonding Committee passed a budget bill Tuesday that relies on $17.5 billion in general fund revenues for next year and appropriates a little less than half of this year's surplus for tax rebates, a comprehensive tax study and other programs.
The remainder of the surplus, $274 million, would not be enough for Gov. Dannel P. Malloy's proposals to add $250 million to the state's Rainy Day Fund and $100 million for the state employees' pension fund. The bill would result in a $44 million budget deficit next year, which could be averted if revenues continue to grow, according to the Office of Fiscal Analysis’ fiscal note on the bill.
“We have exceeded the amount of the surplus with these different uses of the money,” said state Rep. Ted Moukawsher, D-Groton. “I think we need to be prudent and smart about what we are doing with our money, and when I go back home I need my answer for my constituents. And I can't in good conscience say we have money to spend when we have been in a very precarious situation.”
The bill passed 31-19 along party lines except for Moukawsher, who was the only Democrat to vote against the committee bill, which was largely based on Malloy’s proposal.
The revenue budget bill includes Malloy’s proposed tax rebates for residents, nonprescription drug sales tax exemption, continuation of a tax credit for “angel investors” — start-up company investors — and a pension tax exemption for teachers. It also relies on the controversial keno revenue, $19 million annually, that was passed last year but might be removed from the budget this legislative session.
Earlier Tuesday, Comptroller Kevin Lembo said the state should put any additional surplus funds into its Rainy Day Fund to prepare for future budget deficits, which have been projected by the OFA and the governor’s budget office.
“Sufficient dollars in reserve will guard against future tax increases and service reductions during inevitable future recessionary cycles,” Lembo said.
Republicans proposed several amendments that failed during the committee meeting.
One would have stopped the $155 million sales and gas tax rebate for residents in order to put more funds toward long-term debt, and another would have given people with private and public retirement accounts an income tax cut on their retirement funds instead of providing income tax relief only for retired teachers’ pensions.
State Sen. Toni Boucher, R-Wilton, said her constituents don’t understand why teachers’ taxes on pensions would be reduced by 25 percent in tax year 2014 and 50 percent in tax year 2015.
“There were some angry people who called to say, ‘Why is the governor once again picking some folks that are going to be winners and others that are going to be losers?’ In other words, ‘Why not me?’” Boucher said.
Boucher proposed an amendment that would have reduced income taxes on private and public retirement funds for Connecticut residents.
Co-chairman state Rep. Patricia Widlitz, D-Guilford, asked the committee to reject the amendment, saying it would have an “extremely significant” draw on the state’s revenue stream.
Republicans strongly opposed the tax rebate proposed by Malloy.
Constituents have said that they would rather see their $55 go toward the state's long-term debt, said state Rep. Vincent Candelora, R-North Branford.
“We look at this small amount of money that we are going to give back to people and it is distressing, because most people will turn to you and say they don't want their children and children's children to pay for all of this debt that we are incurring,” said state Rep. Pamela Sawyer, R-Bolton.
Committee co-chairman state Sen. John Fonfara, D-Hartford, said Malloy proposed the $155 million refund for residents because they had been sacrificing for three years after the state passed a $1.5 billion tax hike.
“Now, for the first time in years, we see a little light at the end of the tunnel,” Fonfara said. "Those who have sacrificed should share in the benefit.”
He added that Malloy was the first governor in recent history to fund the state's long-term obligations, such as pensions, and to bring down the long-term debt.
The finance committee bill’s provisions to return funds to taxpayers would reduce the state’s revenues by about $57 million a year. These would include: exempting municipal employees’ health care coverage from the insurance company premiums tax, $11 million; eliminating the sales tax on nonprescription drugs, $16.5 million; exempting 50 percent of teachers’ pensions from the state income tax, $26.3 million; and providing the angel investor tax credit, $3 million.
Now that the Appropriations Committee has passed its spending budget and the Finance, Revenue and Bonding Committee has passed its revenue budget, it is up to legislative leadership and the Malloy administration to negotiate a final 2015 budget.