Malloy, Dems agree on budget plan

April 21, 2011 12:00 am • Last Updated: April 21, 2011 1:34 pm

By By JC REINDL Day Staff Writer

Hartford - Democratic legislators and Gov. Dannel P. Malloy announced Wednesday that they have reached a deal on his two-year budget plan, with some minor changes to his package of tax increases.

"Earlier than anyone thought was possible, the administrative side of government, the executive side of government and the legislative side of government are in agreement," Malloy, the first Democratic governor in two decades to serve with a Democratic-controlled legislature, said at a news conference in the Capitol.

However, the budget assumes that state workers will give up $1 billion a year in concessions, even though negotiations with the union are ongoing. This spurred the Republicans to accuse the Democrats of being "irresponsible."

The proposed concessions from state workers are to help bridge a projected $3.3 billion state budget deficit over the next two years.

"What we have here is a framework we can all support," Malloy said Wednesday. "What we have here is a budget which we will build upon in the future."

The governor's staff said a total dollar amount for the budget plan will be available today.

Republicans Tuesday presented an alternative two-year budget that they said would raise no taxes and cut annual spending by $1.5 billion.

Senate President Donald Williams Jr., D-Brooklyn, and House Speaker Christopher Donovan, D-Meriden, said the Finance and Appropriations committees will vote today on the budget's tax and spending portions. And one legislative chamber could possibly vote on a final budget as early as next week.

Malloy acknowledged that he has yet to wring the $1 billion in annual concessions from state workers that is written into his budget plan, noting that talks with unions representing the more than 40,000 state workers are continuing. Nevertheless, he said, the budget could still pass both houses of the legislature - and ultimately his desk - with temporary placeholders for that line item.

"They're going," Malloy said of the labor talks. "There's no white smoke coming out of the chimney right now, but there's no black smoke, either."

But the budgeting assumptions had Republican leaders seeing red.

"What I heard today is that he's willing to sign a budget deal with a $2 billion 'maybe,' " said House Minority Leader Lawrence F. Cafero Jr., R-Norwalk. "One might argue it's a little irresponsible to do such a thing. Others might argue it's unconstitutional to do such a thing when our Constitution requires a balanced budget."

The governor's budget would now raise taxes by $1.4 billion instead of $1.5 billion for the fiscal year starting July 1.

It would still raise taxes on a variety of consumer goods such as cigarettes, manicures, pet grooming and clothing and shoes costing more than $50. But it would no longer impose new taxes on items that include haircuts, car washes and boat services. It also keeps tax-free week for back to school and scraps a plan for coupons that would have charged consumers a sales tax on the full price of an item rather than the discounted price.

The proposed tax on "luxury" items such as vehicles costing more than $50,000, boats more than $100,000, jewelry more thanr $5,000 and clothing more than $1,000 has been reduced to a flat 7 percent tax. Malloy's initial plan called for 3 percent on top of the state sales tax, which is currently 6 percent.

However, the newly amended budget would raise the sales tax to 6.35 percent on most retail items.

It also keeps his plan to expand the number of income-tax brackets from three to eight. Officials said the income threshold for the new 6.7 percent top rate has been expanded downward, and would hit couples making $500,000 and single filers earning at least $250,000.

The budget will also maintain most state funding for cities and towns and create a new earned income tax credit for some workers.

The amendments announced Wednesday represent the third major adjustment to the plan Malloy presented in February. Last week he said he would reinstate $300 of the $500 property tax credit he sought to eliminate, and would soften income tax increases for middle class residents while taxing more people with higher rates.

"What we are asking the people of Connecticut to do is to agree with us and make a shared sacrifice," Malloy said.

Labor spokesman Larry Dorman said union officials are pleased that the amended budget asks the wealthiest to pay more in taxes. But they would like to see more sacrifice from big business and the rich, rather than the struggling middle class.

Dorman said he does not consider the budget's assumption of $1 billion in concessions as a bargaining ploy for negotiations with state unions.

"I don't see it as a pressure tactic," Dorman said. "I think it's legislative leadership doing what it needs to do to move forward a budget."

j.reindl@theday.com