Governor Offers Budget Recommendations

During an address before the joint session of the General Assembly last week, the governor announced his proposed budget for the next two years. Senators and representatives came together in the Hall of the House to listen to the governor’s plan that focused on jobs and the economy, education, municipal aid, the safety net, streamlining state government, investing in infrastructure and adopting greater transparency. While it remains to be seen whether the budget would achieve these goals, many have expressed concerns over increased levels of borrowing and spending.

In this week’s column, I would like to share my initial take on some of these issues. Overall, the governor’s proposed budget will cost more than $43 billion over two years. While the governor has claimed that it will cut spending, the proposed budget grows by nearly 10 percent or $1.8 billion during that time. Another concern is that this budget relies upon more than $750 million in additional borrowing to simply keep up with our daily operating expenses.

As part of the proposed budget, changes to the tax code will be coming. While the governor claims that there are no new taxes in the budget, there are in fact three taxes that were going to “sunset” or expire later this year that will be extended. These include the generator tax, corporate tax and insurance premium tax.

The governor is also proposing new exemptions for taxes on motor vehicles and clothing under $25 in the second year of the budget. While these exemptions seem promising and would help provide relief to Connecticut families, it is important to understand these proposals in context. If you recall, Governor Malloy originally made clothing under $50 taxable. Now, it seems that he is taking credit for repealing a tax that he himself pushed through the legislature as part of the largest tax increase in state history in 2011.

The exemption for motor vehicles would apply to the first $20,000 of assessed value, which would allow car owners to keep more of their own money. However, they could also be forced to pay more for residential property tax because the motor vehicle tax is a major part of some town budgets. In response to this loss of revenue, local officials would have to find new sources of revenue through increased taxes on residential or commercial properties or spending cuts.

On jobs and the economy, the governor will be continuing previous efforts to attract businesses to our state by offering huge investments to relocate operations here and create jobs. During the first half of his term, we have seen the “First Five” program expand and offer hundreds of millions of dollars to large companies, such as Cigna, ESPN, NBC Sports and Alexion Pharmaceuticals. Another program to encourage bioscience promised additional state funding to bring Jackson Labs to our state. While I have criticized some of these efforts, it appears that the next two years will see similar initiatives and many are concerned over this extraordinary level of borrowing and spending.

On a more positive note, it appears that the budget takes steps to reduce the size of state government by eliminating an additional 7 agencies. This will bring the total number to 53 agencies and is projected to save about $5.5 million per year.

Building on last year’s education reforms, the budget would increase state funding for schools through Education Cost Sharing (ECS) aid. This program typically provides an additional source of funding for public Kindergarten through grade 12 schools in an effort to support poorer school districts and close the achievement gap.

This increase is pegged at over $152 million, but questions have been raised over this proposal. Some are concerned that this increase will modify how state funding is provided to our municipalities, such as the payment in lieu of taxes (PILOT) program. Some have criticized this aspect of the budget simply as a “shell game” that will negatively impact our towns and cities.

Over the next few months, legislators will review the governor’s budget recommendations and likely make additional changes. Thanks to the legislative process, including committee meetings and public hearings, elected officials and members of the public can often have an important impact on how the budget is developed. If you would like to review the governor’s budget proposal, please visit the governor’s Office of Policy and Management (OPM) website at www.ct.gov/OPM.