Gov. Dannel P. Malloy offered his third budget for the new fiscal year, pitching a compromise Monday that cuts his big transportation initiative, while asking legislators to reduce a sales-tax-sharing plan — but not by as much as he originally sought.

Malloy would scale back his plans to reduce funding for hospitals, but also would impose deeper reductions on mental health and substance abuse treatment programs than legislators have proposed.

But whether that plan would successfully spark a budget deal before the General Assembly session ends at midnight Wednesday probably would hinge on some overnight political magic. House Speaker J. Brendan Sharkey, D-Hamden, talking with reporters around 8 p.m. Monday, said negotiations between the two branches — which have stalled since late last week — need to resume and bear fruit by this morning.

Sharkey was careful not to set a hard deadline. Rather he cited legislative logistics.

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[naviga:li]Lawmakers and Malloy need to agree on a spending and revenue plan, policy language to implement budgetary changes, and a bonding bill to set the state's capital program.[/naviga:li]

[naviga:li]It can take many hours for staff to prepare a bill, and measures generally have to be presented to rank-and-file lawmakers in closed-door caucuses before they are brought out for a floor debate.[/naviga:li]

[naviga:li]And these fiscal bills would have to clear both the House and Senate.[/naviga:li]

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Is there a chance to get all of this done by midnight Wednesday?

"I think there is, if we can get that done this evening," said Sharkey, who met privately Monday afternoon with Malloy and Senate President Pro Tem Martin M. Looney, D-New Haven. "That is why we are all sequestered right now to go through the budget again line by line — literally line by line — to identify those areas where we could try to find those necessary cuts."

The speaker said "the governor has made some significant changes to his early positions from a policy standpoint," adding that the pressure of the adjournment deadline also helps to "keep people focused on the task at hand. It may not happen. We may not get there, but it would be better if we did."

The governor's $19.74 billion proposal adds $42 million to the bottom line Malloy offered legislators last week, effectively matching the spending level the legislature's Democratic majority is seeking.

The new budget, like the governor's earlier two, would not increase taxes.

Malloy has been pressing the legislature's Democratic majority to accept more spending reductions and to reduce their reliance on temporary revenues and other one-time budget solutions that only help balance the budget in the 2016-17 fiscal year.

That's because, while there is a $960 million shortfall in state finances starting July 1, the projected deficit for the 2017-18 fiscal year is about $2.25 billion, according to a forecast from the legislature's nonpartisan Office of Fiscal Analysis based on the latest state revenue estimates.

Republican legislators have proposed more reductions that save money both next fiscal year and down the road. But Democratic legislators objected to Republican proposals both to cut the sales-tax-sharing plan and drastically cut state bonding available for municipal school construction, capital projects at colleges and universities, state building maintenance and numerous community-based projects.

"This proposal makes great strides to find compromise with both Democrat and Republican plans while still maintaining the key priorities I've stressed throughout this session and especially in recent days," Malloy wrote in a letter to legislative leaders obtained by The Mirror.

Besides not increasing taxes and minimizing use of one-time revenues, the governor also has said he won't support borrowing. His plan does not include a controversial Democratic legislative proposal to entice corporations to forfeit some of their tax credits next spring in exchange for a larger tax break two years down the road. The governor said last Friday this is tantamount to borrowing.

Legislators' reactions cautious but positive

The governor's plan drew cautious-yet-positive responses from both Democratic and Republican leaders in the House of Representatives.

"We're still breaking it down, but obviously it's a positive step that we are sharing proposals," House Majority Leader Joe Aresimowicz, D-Berlin. "There were aspects of the governor's proposal that were difficult for him to offer, and we appreciate that. We are doing things like that too."

House Minority Leader Themis Klarides, R-Derby, said Monday afternoon that her staff also was still analyzing the governor's plan, but added she believes it was "a good-faith effort."

"Any time there are communications that bring people to the table, that's a good thing," she said.

Looney said the governor "did move in our direction in a few key areas," including hospital funding and municipal aid, and clearly sacrificed a portion of funding for his transportation initiative.

Looney said he anticipated legislative leaders would try to reciprocate and move their budget position closer to the governor's, though he declined to offer any specifics. "I would also say I believe we have been doing that all along," Looney said, adding Democrats have accepted many cuts to achieve the goal of not raising taxes.

The Senate president pro tem also said he believes the governor and Democratic legislative leaders still are more than $100 million apart in their respective proposed spending levels.

The state's chief business lobby, the Connecticut Business and Industry Association, praised Malloy both for avoiding tax hikes and focusing on curbing spending over the long haul.

"Connecticut faces significant challenges not only in 2017, but for the foreseeable future. That's why it's so important that achievable spending reductions which have value year after year are made this legislative session," Bonnie Stewart, CBIA's tax specialist, said. "One-time revenue takes are a missed opportunity. That's why we appreciate the governor's proposed spending reductions and move away from one-shot revenues. ...If we are to make Connecticut the state that it can be, and we all want it to be, action must be taken this year to make Connecticut more efficient and stabilize our fiscal situation."

The Connecticut Conference of Municipalities criticized the plan, though, saying it would shift tax burdens onto municipal taxpayers."They are simply deep cuts in current state aid programs that only serve to shift the tax burden from the State onto residential and business property taxpayers across Connecticut," CCM Executive Director Joe DeLong said.

Governor's, Democrats' priorities both would be cut

The governor is suggesting that he and the Democratic majority both sacrifice on their biggest initiatives from the 2015 General Assembly session.

Malloy, who wants Connecticut to commit to a 30-year transportation investment program, proposed cutting $50 million of the roughly $130 million in new revenue earmarked for the Special Transportation Fund next fiscal year.

The governor also is asking legislators to scale back their sales-tax-sharing plan with cities and towns by about $60 million, from $245 million to $185 million.

Malloy had recommended last week dropping the revenue-sharing to $145 million.

About half of that $185 million would go toward a program to cap property taxes on motor vehicles.

Both the governor and Democratic legislative leaders, who adopted the transportation and sales-tax-sharing plans last June, had hailed them as "historic" and "transformative."

But Malloy wrote in his letter Monday to legislative leaders that this compromise proposal "is a responsible reaction to our new economic reality."

The governor's plan makes no other major changes to the municipal aid in his April 12 plan, which had reduced funding for the state's primary education grant by $64 million from the original 2016-17 budget. While the governor's most recent plan would restore most of the cuts to ECS he had proposed, those cuts are offset by his plan now to eliminate state funding for transporting children to school and crossing guards. He also proposed cutting support to the state-run vocational technical high schools by $9.1 million, a 5.3 percent reduction. While Malloy did not propose further cuts for these schools in his previous budget proposals, he did include allowing the education department to cut from various line items, which included to this school system.

Malloy did not seek further cuts to the state's public colleges and universities, though he is proposing cutting state-funded financial aid by $2.3 million.

Malloy does build a new, $60 million "lapse," an undefined savings target into his new budget, another effort to compromise with the Democratic majority. The administration had criticized the Democrats' reliance on savings targets to be achieved once the new fiscal year is underway.

Hospital reductions eased; social services cut deeper

Malloy would still cut grants for mental health and substance abuse treatment far below what both the Democrat and Republican proposals would fund. While Malloy has proposed cuts to this funding multiple times in recent years, legislators have routinely restored some of the funding he suggested eliminating.

The governor's plan would cut supplemental payments to hospitals by $39.6 million, still more than legislators recommended cutting but less than what Malloy called for in his most recent proposal.

The money goes to hospitals to help repay a portion of the $556.1 million in taxes they pay the state – redistributing the money to the industry allows the state to generate federal matching funds – and Malloy's April 12 proposal would have wiped out the repayment of nearly $80 million. (The actual hit to hospitals would be higher because the state funding brings in additional federal dollars.)

Malloy's proposal does not include a $26 million savings in the Medicaid program, which Democrats proposed last week based on the premise that it represented about two days' worth of expenses in the nearly $2.5 billion program and could be achieved through natural fluctuations in spending.

Malloy's plan would cut $8.2 million – 26 percent – from the behavioral services program run by the Department of Developmental Disabilities, which serves children and adolescents with developmental disorders and significant behavioral health or psychiatric disorders. The program – formerly known as the voluntary services program – is intended to help families care for their children at home. The current year's budget cut it by close to 10 percent. Democrats called for a smaller cut to the program, while Republican did not propose any cuts.

Malloy's plan would add nearly $5 million to funding that provides employment services and day programs for people with intellectual or developmental disabilities – a funding stream that advocates and families of people with intellectual or developmental disabilities have been worried would take a big hit in the final budget. If that happened, they warned, parents might have to stop working or hire people to stay home with their young adult children during the day.

The governor appears to have adopted the Democrats' proposal to consolidate the six legislative commissions that advocate for demographic constituencies into two new commissions, significantly reducing their funding. Republicans called for eliminating the commissions, which provide research and advocacy work.

Keith M. Phaneuf, Arielle Levin Becker and Jacqueline Rabe Thomas are reporters for The Connecticut Mirror  (www.ctmirror.org). Copyright 2015 © The Connecticut Mirror.kphaneuf@ctmirror.org, alevinbecker@ctmirror.org, jrabe@ctmirror.org