Connecticut Legislature Approves Budget [New York Times]

June 4, 2013

Article as it appeared in the New York Times
By Peter Applebome
June 3, 2013

HARTFORD — Connecticut legislators on Monday passed a two-year, $37.6 billion budget that includes a large expansion of gambling and reflects the degree to which Connecticut faces continuing financial budget distress despite passing a record $1.5 billion tax increase in 2011.

After approval by the Connecticut House at 5:15 Sunday morning, the State Senate voted 19 to 17 on Monday night to adopt the budget, which preserves aid to Connecticut municipalities, includes major spending increases for science and technology at the University of Connecticut, and maintains the state’s safety net for social services without large-scale tax increases. No Republican in either chamber voted to approve the budget.

To strike the budget, legislators relied on one-time revenues from various sources, adding 600 lottery terminals to bars and restaurants around the state for keno — a gambling contest in which players try to guess which numbers will be randomly generated by a computer — and by shifting about $6 billion in federal Medicaid assistance out of the budget, which kept it under the state spending cap.

Gov. Dannel P. Malloy, a Democrat in a state where the party controls both houses of the legislature, acknowledged that the budget was imperfect, and that it reflected “many tough choices and hard compromises.” But he said the budget contained no new taxes — Republicans noted that tax revenues would still go up — and made substantial investments in education and economic development.

“This budget shows that we’ve got our priorities straight, and we are determined to keep Connecticut moving forward,” Mr. Malloy said in a statement.

Mr. Malloy and Democrats in the legislature say the budget maintains important services and addresses fundamental fiscal problems like adequately financing the state’s pension system after two decades of fiscal slippage under Republican governors. The budget raises the pension contribution to $1.9 billion from about $1.5 billion in the current fiscal year.

It also expands education reforms adopted last year, and it adds a new expansion on science and technology programs at the University of Connecticut.

Supporters say the budget helps towns across the state by avoiding feared budget cuts that could have forced them to raise property taxes. And it made commitments to education, like $27.5 million for the Commissioner’s Network, which aids the state’s lowest-achieving schools.

But Republicans said the budget was full of gimmicks and failed to comply with the rigorous accounting principles Mr. Malloy promised to implement after his election in 2010 but has since delayed.

They say it reflects the degree to which Mr. Malloy has failed to live up to his promise two years ago that a record tax increase would put Connecticut on a path to fiscal sustainability. In question now is whether the state can balance its budget in the biennium that follows the 2014 governor’s election without major program cuts or substantial new taxes on top of the ones passed two years ago.

State Senator L. Scott Frantz, a Republican from Greenwich, raised the specter of Connecticut as a state in long-term decline and offered reports on Connecticut’s debt, business climate and job growth that showed the state near the bottom nationally in economic health. Mr. Frantz said the current budget seemed to offer more of the same in a state undergoing an “anemic” business recovery.

“They see the writing on the wall,” he said of those casting harsh judgments on the state. “They see that we are on an unsustainable path.”

Even some supporters of the bill’s spending priorities expressed alarm at the fiscal foundation underlying them.

“We applaud lawmakers for passing a budget that advances early education and health coverage and preserves supports for low-income families in the state,” said Wade Gibson, a senior policy fellow at Connecticut Voices for Children. “However, we are concerned about the budget practices employed to make things balance. A heavy reliance on borrowing and a variety of one-shot revenues will leave holes in future budgets. At the same time, multiple fund transfers and accounting changes obscure precisely how revenues and spending were brought into balance.”

While there are no new taxes, Republicans say the budget includes $316 million over the biennium in new tax revenues, in large part as a result of taxes that were continued after they were due to expire. Low-income workers would lose $21 million in tax relief next year because of a reduction in the state earned-income tax credit.

Other revenue will come from money from a various funds, including the state’s transportation fund just as a gas tax increase, approved in 2005, that could raise $60 million kicks in. The budget would not have met the state’s budget cap without taking the federal Medicaid financing out, but Democrats say the changes comply with the standard for states around the country in accounting for Medicaid.

Senator Jason Welch, a Republican from northwest Connecticut, said the budget was particularly disappointing because the tax increases two years ago were billed as both a hard pill to swallow and a panacea. “It was a hard pill to swallow, but it certainly was no panacea,” he said.