New state budget funds priorities, but overspends cap

(July 17, 2007) Connecticut's new two-year, $36 billion budget and all of the measures to implement it were approved by lawmakers just prior to the start of the state’s new fiscal year on July 1. While the budget funds important initiatives such as brownfield remediation, education, energy, health care and housing, it exceeds the state’s spending cap in the first year. This raises serious concerns about whether such a level of spending can be sustained in future years.

Budget levels

The new budget increases spending by 8.6% in the first year, and by 4% in the second. It exceeds the spending cap by $690 million in the first year. Although spending increases again in year two, the spending cap is not exceeded because the first year's increase causes the overall base to be recalculated.

Taxes

Initially, both the governor and the majority in the Appropriations Committee supported changing the state income tax, as well as other taxes, in an effort to bring in additional revenues.

Fortunately most of the proposed tax changes did not pass. While taxes on cigarettes have risen by 33%, to $2 per pack, lawmakers were persuaded not to increase the state’s personal income tax, sales tax or corporate tax.

However, lawmakers did order four tax-related studies. These will review the impact of limiting property tax increases, implementing an earned income tax credit, eliminating the estate tax and adopting the provisions of the Streamlined Sales and Use Tax Agreement.

Other important initiatives

Other key issues were debated this year, including the availability of a highly skilled workforce, quality health care at an affordable price, planning that will ensure the state's need for both reliable and affordable energy are met, affordable housing, and brownfield remediation. All of these issues were addressed in varying degrees by the state budget bills.