Sen. Fasano: “When are we going to change?” – Senate, House Approve $40 Billion Budget [Courant]

June 5, 2015

Hartford Courant

HARTFORD — After more than five hours of debate, the Senate voted 19-17 on mostly party lines to approve the two-year, $40 billion budget that raises taxes on corporations, wealthy individuals and the middle class.

Two fiscally conservative Democrats – Sen. Paul Doyle of Wethersfield and Sen. Joan Hartley of Waterbury – joined with 15 Republicans voting against the budget crafted by Gov. Dannel P. Malloy and top Democratic leaders.

Legislators were bitterly divided over a controversial package, approved by the House earlier in the day, that hikes cigarette and corporate taxes, extends the selling hours for package stores by one hour a day, imposes the sales tax on car washes, reduces property taxes on cars in many communities, and legalizes keno gambling.

Malloy will sign the budget soon after he receives it, a spokesman said.

The Senate approved the measure with only 30 minutes left before the General Assembly’s mandatory adjournment deadline of midnight as lawmakers scrambled to finish their work.

Before the budget vote, there was high drama on the Senate floor as Democrats tried to cut off the budget debate in a highly unusual move. As the clock ticked toward midnight, lawyers gathered in several huddles and talked about how to end the debate that had lasted more than five hours. Senate Republican leader Len Fasano stood up on the floor to complain that Republicans had been excluded from fiscal negotiations with Malloy and top Democratic leaders.

It took an unusual parliamentary move by Democratic Senate President Pro Tem Martin Looney to break the filibuster. He arose from his seat at 11:06 p.m. to interrupt Republican Sen. Art Linares, the latest in a succession of GOP senators who intentionally drew out their rhetoric about the budget’s excesses.

Looney said he wanted to raise a “point of parliamentary inquiry,” and appeared ready to try to “call the question” to end debate – but Fasano then called for a short pause. Then Fasano said “out of respect for the institution,” he would conclude the Republicans’ arguments against the budget bill.

He did it with evident emotion, saying, “The reason this took so long” was that Republicans were “locked out of the room” by legislative majority Democrats and the governor in budget talks. The filibuster was the “culmination of frustration” at the Democrats’ strong-arm methods, Fasano said, asking “When are we going to change?”

“We were locked out of the room,” Fasano said at 11:15 p.m. with only 45 minutes left before the deadline. “Yes, we’re frustrated. Yes, we’re upset. Yes, we feel we should be at the table. … Don’t give us a budget five hours before we vote. Give us a fair opportunity, and we don’t get it.”

After Fasano’s speech, Looney delivered a wrap-up speech in support of the budget.

“It is one of the best budgets that I have encountered in my 35 years in the General Assembly,” said Looney, who crafted much of it. “This has been a difficult, challenging year, but it has come to an excellent resolution. … We have talked for years about the burden of the municipal property tax … and for the first time we are taking action to deal with that.”

Aid For Cities And Towns

For the first time, 0.5 percent of the 6.35 percent state sales tax will be earmarked for cities and towns. Also, Looney pushed strongly for a reduction of car taxes in high-tax towns, including his hometown of New Haven.

“It is a reasonable budget, meeting the reasonable needs of the state,” said Looney. “This is a budget to celebrate. This is not a budget to be defensive about.”

Regarding the high-profile complaints from General Electric and others about combined reporting by corporations, Looney said it was “something that is standard in many states in this country.”

As the budget-implementation and other bills were never debated, lawmakers will return to the Capitol in special session in the coming weeks.

With so much unfinished business, Malloy did not deliver the traditional end-of-session speech to the General Assembly after the session ended. Only hours earlier, Malloy had fully intended to speak in the historic Hall of the House to a joint session.

House Democrats narrowly approved the budget plan Wednesday morning after five hours of debate, rejecting the opposition of Republicans and warnings from four major corporations that they might consider leaving Connecticut if the tax-and-spending plan was adopted. The budget passed in the House in dramatic fashion on a mostly party-line vote of 73 to 70 with 11 Democrats joining 59 Republicans in opposing the plan.

The package increases taxes by a net of $1.1 billion and overall revenue with permits and fees by $1.5 billion over two years, according to the legislature’s nonpartisan fiscal office. The budget that was crafted by Malloy and Democrats provides funding for 135 new state employees in the first year and 62 additional employees in the second year in departments across the state government and provides millions of dollars in overtime for state employees.

One of the most controversial issues in the budget is the increase in taxes on businesses by more than $700 million over two years, including extending the 20 percent surcharge on the corporate profits tax and creating a new, “unitary” form of calculating taxes that was strongly opposed by major corporations. Fairfield-based General Electric placed the issue in a bright spotlight this week with a rare public statement opposing the tax increases. Hartford-based Aetna also complained about the increase in the sales tax on computer and data processing services as too onerous for high-tech corporate operations.

Social programs, improved transportation, cuts in car tax

Despite complaints about tax increases, Democrats hailed the budget as a necessary document to fund social programs and improve transportation. The bill also calls for cutting the car tax for those in high-tax communities, such as Hartford, Bridgeport and New Haven. The tax on an average car in Waterbury would be sliced nearly in half, and car owners in suburbs like Simsbury, South Windsor and Granby would also see car-tax cuts.

Rebutting complaints about the state ranking low in various ratings, Sen. Beth Bye, a West Hartford Democrat, said Connecticut ranks third in the nation for advanced degrees per capita and fifth for science and engineers per capita.
“We’re educated, we’re healthy, and we are productive,” Bye said. “These companies seem to be doing OK in our state because we have a great workforce. It’s not evidence of a horrible place to do business. … Investing in our people leads to profits for corporations.”

But Sen. L. Scott Frantz, a Greenwich Republican who represents affluent communities like New Canaan and North Stamford, said the increased taxes are a major mistake.

“When the history books are written, they will look back on June 3, 2015, and it will be a very important date in Connecticut history,” Frantz said. “The history book will also ask: what went wrong here? It’s one of the 10 worst places to do business. … It’s tragic. It’s just sad. It breaks my heart that this has happened to the state of Connecticut. Did we do it to ourselves? … I think the answer is going to be: yeah, we did it to ourselves.”

He added, “It’s almost like a modern-day “Grapes of Wrath” down in our neck of the woods. I know that sounds like an exaggeration, but it’s not. … I get phone calls from people who say, ‘I own 19 car washes, and I’m going to put the business on the block.’ ”

For consumers, the state sales tax would remain at the current 6.35 percent, but 0.5 percent would be dedicated for major transportation initiatives and another 0.5 percent would go to cities and towns. Among other increases, the so-called luxury sales tax rate would increase to 7.75 percent for cars costing more than $50,000 and clothing items costing more than $1,000, including wedding dresses and expensive suits.

For the middle class, the property tax credit on the income tax would drop to $200, down from the current maximum of $300, in the second year of the two-year budget.

Winners, losers

On the spending side, there were winners and losers. Charter schools were winners as Malloy received the full amount of funding that he requested for expanding the schools, including new charters in Bridgeport and Malloy’s hometown of Stamford. Probate courts were losers as they lost $32 million in state subsidies over the next two years. Much of that money will be covered with higher fees on estates, and the current payment cap of $12,500 per estate will be eliminated. As such, a large estate of $50 million would pay about $250,000 in probate fees, and an estate of $100 million would pay about $500,000 in probate fees, officials said. Money was also cut for honor guards at veterans’ funerals.

Connecticut’s two companies of Governor’s Horse Guards, both more than two centuries old, would have their funds restored and their current headquarters assured in Avon and Newtown under the budget bill.

Both horse troops had stood to lose their $35,000 annual state allotments in an April 27 appropriations committee budget proposal, and the First Company Governor’s Horse Guards — the country’s oldest cavalry unit in continuous service, founded in 1778 — was to have lost its home of 61 years in Avon and be merged with the Second Company Governor’s Horse Guard in Newtown. But after news stories and local officials’ protests, Democratic leaders included $90,000 annually in the bill Wednesday morning to sustain the two horse troops in their current locations
Lawmakers said that hospitals were net losers because, as a group, they will pay more money in hospital taxes than they receive back from pool payments for Medicaid and other low-paid patient care.

Increases necessary to avoid “savage cuts”

House Majority Leader Joe Aresimowicz of Berlin defended the $1.5 billion in revenue increases as necessary to avoid savage cuts in state spending for social programs such as those to help children with autism and cerebral palsy. Democrats, he said, made their decisions about taxes and spending after “seeing the faces of the people of Connecticut who needed help.”

Aresimowicz admitted that the tax increases on businesses and middle-class families “are troublesome” but necessary. “Is it all roses and rainbows and is everybody happy? No it’s not,” the majority leader said, adding: “I know it’s worth it.”

Following the vote, House Speaker J. Brendan Sharkey of Hamden insisted the budget plan “helps Connecticut’s middle class by providing property tax relief” through reform of the system of local car taxes. “It invests in Connecticut’s transportation infrastructure, which is critical to our future economy, asks the wealthy to pay a little more, and sets our state on a more stable, equitable path going forward.”

Republicans and business lobbyists flatly rejected those Democratic arguments. House Republican leader Themis Klarides of Derby said passage of the new budget is equivalent to “holding up a sign at the border to businesses and saying get out.”

Klarides pointed out that, in 2011, the legislature passed Connecticut’s biggest tax increase in history as a plan that was “supposed to solve this problem.” But she said a failure to control spending now means the General Assembly is about to approve “the second biggest tax increase in our history … What we’re doing is not working.”

Rep. Craig Miner, R-Litchfield, said Malloy repeatedly pledged during his re-election campaign last year that he wouldn’t raise taxes if he won a new term.

“One of these days, we have to keep our word,” said Miner, insisting that “the time is now” for Malloy to veto the budget that he helped craft and that Republicans have enough votes to sustain a veto of the plan.

“What makes us think it’s going to work now?”

Later in the day, senators started battling over the package. Sen. Rob Kane, the ranking Republican on the budget committee, said the tax increases would not help revive Connecticut’s economy.

“It didn’t work four years ago,” Kane said. “What makes us think it’s going to work now?”

Looking back on starting a business with $5,000 in his pocket 21 years ago, Kane said he is not sure that he would do that again today.

Senate Republicans offered an amendment to strengthen the state’s spending cap as they have criticized Malloy and Democrats for maneuvers that they say skirted the cap. Large amounts of Medicaid spending was moved out from under the cap several years ago, and Democrats moved this year to exempt pensions from the spending cap calculations.

Republicans said that not enough money was being funneled back to cash-strapped hospitals, including many that have been searching lately for more well-financed partners.

“We have heard from hospital executives,” said Sen. Tony Hwang, a Fairfield Republican. “We have heard from hospital staff.”

Frantz said that Greenwich Hospital does “yeoman’s work” for patients who cannot afford to pay, including taking patients from two hospitals that have closed in nearby Westchester County, N.Y.

In seven years at the Capitol, Frantz said he has never received so many calls and emails about the budget. He said that some rich individuals could leave the state with “a whole lot of taxable wealth and taxable income.”

“There are many who feel if this budget is approved that we are committing fiscal suicide,” Frantz said. “How can this happen to us? What’s going wrong with Connecticut?”

With only two hours left before the deadline, Sen. Toni Boucher of Wilton said, “There is still time to pull this budget out of the fire before everybody gets burned.”

The House began its budget debate shortly before 5:30 a.m. Wednesday after a marathon back-room effort by Democratic leaders to gather enough votes to approve the plan. In the next few hours, the chamber’s Democratic majority repeatedly rejected Republican amendments aimed at reducing or eliminating the plan’s $700 million in business tax increases. The final House budget vote came at 10:30 a.m.

One early test vote in the House was decided primarily along party lines, defeating a Republican amendment by a narrow 72-68 vote. With eight members (three Democrats and five Republicans) absent or not voting, the Democrats needed 72 votes to pass their budget, and surpassed that margin by just one vote.

GOP warns of dire consequences

House GOP lawmakers warned of dire consequences if the Democratic budget is approved. “The fiscal horror of this budget has clearly struck a chord with both businesses and individuals,” said Rep. Gail Lavielle, R-Wilton.

Rep. John Frey, R-Ridgefield, said he has spoken with the chief financial officer of General Electric, one of several large corporations that has warned it will reconsider staying in Connecticut if the Democratic budget passes.

“I’ve known this guy for 10 years – he’s serious,” said Frey, who warned that the departure of firms like GE could result in “cataclysmic damage to the state of Connecticut.”

“This budget is all about hitting the middle class again and again and again,” said Rep. Jason Perillo, R-Shelton, saying proposed tax changes to property tax credits and on sales taxes for computer and data processing services damage middle class workers. Perillo said the social media has been flooded with pleas from the public saying, “Please don’t do this… But no one is listening, and a failure to listen is a failure to lead.”

Democratic lawmakers insisted the tax increases are needed to pay for major transportation improvements and to protect key social service, education and environmental programs.

Rep. Jeffrey Berger, a Waterbury Democrat who is co-chairman of the tax committee, explained the numerous changes on the tax side. “This is the reason why we make the big bucks in this chamber everybody,” Berger said as he looked at his colleagues at 5:30 a.m. Wednesday from his seat in the back row of the House chamber.

Legislators debated different bills all day Tuesday and into Wednesday before debating the package that funds everything from prisons to state universities and includes 3 percent raises for non-union managers and judges.

The debate was postponed Monday and Tuesday as legislators said the Democrats lacked the necessary 76 votes to pass the bill in the House. But leaders said that when the debate started in the House, that would be a signal that they had reached the necessary votes to pass the package – and that is what happened.