Hartford — A week after suspending budget talks with the administration, the Democratic leaders of the General Assembly offered an olive branch and a new fiscal plan Thursday to Gov. Dannel P. Malloy.

House Speaker J. Brendan Sharkey of Hamden and Senate President Pro Tem Martin Looney of New Haven announced a plan that they say meets Malloy's key principles by eschewing new taxes, borrowing or raiding the Rainy Day reserves.

But the plan also employs a controversial tax credit that critics say amounts to borrowing from Connecticut's businesses. It also taps more than $110 million from fund sweeps and other one-time sources  — including the sale of University of Connecticut property at the West Hartford branch. And it adds $41 million to already aggressive savings targets to be achieved after the next fiscal year is underway.

A spokesman for Malloy said the governor was grateful for the new plan and invitation to discuss revisions, but Malloy could not sign the budget without significant changes.

"It relies on hundreds of millions of dollars in one-time revenues and unrealistic savings targets," said Devon Puglia, the spokesman. "It is critical that we do things differently this year and find a better, more sustainable way of budgeting. This proposal is still too close to the status quo. It contains too much ‘business as usual.' "

Sharkey and Looney said they have the votes for passage, but they were open to changes – and input from the Republican minority.

"With proposals on the table from the governor, Democrats, and Republicans, we are hopeful and optimistic that legislative leaders are now ready to begin negotiations in earnest," Puglia said. "We should reconcile our budgets and work to achieve long-term, structural changes."

The revisions from the Appropriations Committee achieve a key benchmark in crafting the next budget by eliminating a deficit of about $340 million from their last plan.

Unfortunately, because of eroding income and corporation tax trends identified over the last week, the budget proposals that had been circulating at the Capitol — including two from the governor and one just last week from the Republican minority — had been expected to be officially out of balance by the weekend.

Democratic leaders said their new, near-budget-deal at least conforms to the same revenue projections Malloy and the GOP used in their last plans. The challenge for all sides now is to find common ground — and adjust to the next drop in projected tax receipts, a problem which probably will exceed $180 million.

The Democrats’ latest plan imposes deep cuts on agency salary accounts, reduces education aid to wealthier communities, preserves an initiative to share sales tax receipts with municipalities, and establishes a tax credit deferral plan that would allow businesses to voluntarily pay more taxes next year — in exchange for a larger return from the state two years down the road.

“It is a budget that reflects we are in a time of volatile revenues,” Looney said, adding it preserves “substantial property tax relief for municipalities."

The fiscal blueprint also reflects Democratic legislators’ goal to reduce the cost of state government over the long-term, Sharkey said, adding “there are hundreds of millions of dollars in cuts that will continue for years.

The Democrat-controlled Appropriations Committee drew criticism from Malloy and from GOP leaders on April 6 when they endorsed a $19.9 billion budget that was about $340 million out of balance.

Democratic leaders said Thursday they made several hard choices to close that gap while maintaining the Democratic caucus's goal of avoiding tax hikes this spring. The plan also does not tap the state’s modest, $406 million emergency reserve, commonly known as the Rainy Day Fund.

Besides preserving all but $8 million in a $245 million sales-tax-sharing-plan with cities and towns, the new plan restores about 85 percent of the funding for hospitals that would be cut under a proposal form the governor.

Though there are no tax hikes in the Democratic legislators’ new plan, the voluntary tax credit deferral initiative, which lawmakers hope will raise $60 million next fiscal year, already is drawing criticism.

Republican leaders on the tax-writing Finance, Revenue and Bonding Committee said Wednesday — after The Mirror disclosed details of the proposal — that it merely was borrowing by another name and would weaken the state’s finances in the long run.

Democrats also hope to raise an extra $11 million next fiscal year by expanding Connecticut's bottle deposit program.

The new budget also employs a host of one-time solutions to balance their plan including:

- A $25 million sweep from an energy efficiency fund.

- $6 million sweep from a biomedical research fund.

- $12.6 million from the sale of UConn's West Hartford branch property.

- And $41.3 million in new savings targets to be achieved during the upcoming year, including $17.3 million from agency personnel accounts.

Malloy warned Democrats earlier this month that the $239 million personnel savings built into the original Appropriations Committee plan was too aggressive, and probably would not be achieved simply by the 2,500 jobs the governor is working to eliminate now through layoffs, retirements and hiring restrictions.

Sharkey said there are clear distinction between this proposal and plans Malloy and the Republican minorities have proposed.

Besides providing more funding for municipalities and hospitals than Malloy has proposed, the Democrats’ budget also rejects the governor’s push to give department’s block grant appropriations that would leave the executive branch with more control over specific line items in the budget.

“We believe there is more transparency to the taxpayers of the state,” the speaker said.

He added that the Democratic plan avoids the “huge cuts” to higher education proposed by Republicans. The GOP plan also caps annual bond issuances at $1.2 bllion — about 60 percent of the current level. This restriction on borrowing would eliminate crucial financing for manufacturing and other business assistance, House Majority Leader Joe Aresimowicz, D-Berlin, said.

If budget talks are to resume — at least between the Democratic majority and Democratic governor — then a rift between Malloy and Sharkey must be closed.

After Malloy criticized the appropriations panel for releasing an unbalanced budget, Sharkey said the spending plan the governor issued earlier this month amounted to a “personal hit list.”

The speaker and other Democrats objected strongly to Malloy proposals to cut not only the sales-tax-sharing plan, but also funds for hospitals and social services.

“The governor has made it clear he has very different priorities than the legislative branch,” the speaker said on April 21, when he said the best course would be for the Democratic majority to craft a budget without negotiating with Malloy.

The governor’s office said Wednesday that Malloy would sign no budget into law that he had played no role in negotiating. 

All of the competing budget proposals for 2016-17, including the latest one, have one thing in common: They no longer are in balance.

The $19.77 billion plan Malloy offered on April 12 and the $19.7 billion budget GOP leaders unveiled on April 25 both were designed to close a roughly $930 million hole in the preliminary 2016-17 budget enacted last June.

But last week Malloy’s budget office reported that corporation tax receipts this fiscal year are coming in $85 million below anticipated levels. And the legislature’s nonpartisan Office of Fiscal Analysis reported Thursday that this year’s income tax receipts are $97.3 million below expectations.

The challenge for everyone, Looney said, is to close this last revenue problem before the regular 2016 legislative session ends at midnight Wednesday.

“Right now,” he added, “we are either all in balance, or we all are not.”

The legislators' budget modifies the governor's plans to eliminate state education aid to the state's wealthiest communities. The legislative plan would significantly lower the amount those towns receive, but it would not eliminate any town's entire Education Cost Sharing grant.

The formula that directs state funding to communities is designed to provide more money to municipalities with more high-need students and those least capable of raising money locally. The state has not cut funding to any town over the years, however, as student enrollments have declined and property values have risen. Forty-three towns — including Darien, Easton, Greenwich, New Canaan and Westport — last school year collectively received $20.8 million more than dictated by the formula.

The state's public colleges and universities were largely spared from further proposed cuts. UConn would be cut by another $500,000, and the state would get to keep the $12 million in revenue from the sale of the West Hartford campus.

Keith M. Phaneuf, Mark Pazniokas, Arielle Levin Becker and Jacqueline Rabe Thomas are reporters for The Connecticut Mirror (www.ctmirror.org). Copyright 2016 © The Connecticut Mirror.