Sen. Kane: Taxpayers shouldn’t be surprised to see their taxes rise yet again [Waterbury Republican-American]

November 28, 2012

The following article appeared in the Waterbury Republican-American on November 28, 2012
Few options available for Malloy administration to balance budget

— State spending is galloping ahead of taxes and other revenue, putting the state government on an unsustainable path. The Malloy administration is estimating revenues will grow $3.1 billion over the next three fiscal years, while state spending is projected to grow $3.9 billion at the same time.

Meanwhile, the state’s constitutional spending cap will permit growth of only $1.7 billion. This is the dilemma confronting Gov. Dannel P. Malloy and the legislature as they prepare to enact a new two-year budget next year. Members of the General Assembly’s two budget committees heard Tuesday from the state budget director and the legislature’s top budget analyst on the challenges that lie ahead.

The governor’s Office of Policy and Management is estimating a shortfall of nearly $1.2 billion in the first year of the upcoming two-year budget cycle and nearly $1 billion in the second year. The legislature’s Office of Fiscal Analysis is projecting gaps of $1.1 billion and $1 billion.

Benjamin Barnes, the secretary of OPM, reiterated Malloy’s intentions to close the budget holes with spending reductions and other savings. He also said the administration is not contemplating issuing state bonds called economic recovery notes to finance the deficit. However, Barnes offered lawmakers little insight into how the administration proposes to shave upwards of $1 billion annually from the budget. “We are committed to ensuring the state lives within its means. We will have to make extraordinarily difficult decisions to reduce spending in order to do so. The governor will not propose tax increases as a solution to these challenges,” he said.

Sen. Robert Kane, R-Watertown, asked if Barnes was making an ironclad commitment on Malloy’s behalf not to raise taxes. He is the ranking Republican senator on the Appropriations Committee. Barnes said he would not parse the governor’s statements about taxes and then paraphrased from a Dr. Seuss classic and invoked anti-tax crusader Grover Norquist in responding to Kane’s continued inquiries. “I have no intention. I will not. I shall not. I do not wish to. I feel like I am in ‘Green Eggs and Ham.’ We do not like taxes, Sam I Am,” he said.

“It is a yes-or-no question,” Kane responded, and he noted that an OPM report presented Tuesday states that Malloy is committed to no tax increases. “Correct. ‘No tax increases’ and ‘I do not intend to raise taxes’ are, I believe, the same statement. I understand that you wish to parse them very, very finely and I understand your desire to do that,” Barnes said. However, he said he was not making any absolute promises.

“Our intention not to raise taxes is abundantly clear and I believe until we submit a budget and adopt a budget that does not include taxes I will not satisfy you. So, you’ll just have to wait until we do those things,” Barnes said.

Malloy will submit a two-year budget plan to lawmakers in February and the legislature has until June 5 to approve a final budget in regular session. Barnes also said circumstances could force the governor to rethink his position on taxes. He cited an example that Malloy has used in recent weeks. If Congress were to drastically cut Medicaid, the choice could come down to cutting back on health care for the indigent or raising taxes, Barnes said. “If that were to happen, we are not in the business of making Grover Norquist-style pledges,” he said.

After the hearing, Kane warned of possible tax increases. “Taxpayers shouldn’t be surprised to see their taxes rise yet again, and it’s all because their state government doesn’t have the will to cut spending,” he said.

Barnes said again during Tuesday’s hearing that the administration also does not plan to propose additional taxes to close a projected $365 million gap in this year’s $20.5 billion state budget. Malloy will be soon presenting a plan to lawmakers for erasing this year’s shortfall — and getting a jump on closing the projected shortfalls for the following two years.

Rep. Sean Williams, R-Watertown, sought to pin Barnes down on whether Malloy would seek to repeal any tax breaks. He is the ranking House Republican on the Finance, Revenue and Bonding Committee. The administration is estimating $594 million in tax credits will be claimed this year. This is projected to rise to $631.1 million next year and $645.3 million the following year. Barnes said the administration is open to revisiting tax credits that do not appear to be achieving their goals.

The governor and legislature need to scrutinize tax breaks, said Sen.Toni N. Harp, D-New Haven, co-chair of the Appropriations Committee. “We should look at whether or not they are actually paying off,” she said after the hearing.

Harp also said she views extending taxes that are due to expire differently from imposing new taxes. For example, a 20 percent surcharge on the corporation tax is scheduled to sunset after the 2013 income year. “My feeling is if it is an existing tax and we extend it that is different than a new tax,” she said.

Harp also said she believes savings will have to be squeezed from Medicaid because it is the largest program in the budget. However, Barnes told lawmakers during the hearing that cutting Medicaid will be extremely difficult to do.