Budget Deficit Mitigation Plan Passes

Meeting more than a week after the scheduled end of the 2016 General Assembly session, state lawmakers passed a deficit mitigation package that closes a near $1 billion 2017 budget gap.
The Senate acted last Thursday, approving the budget plan negotiated by Governor Dannel Malloy and Democratic leadership on a 21-15 party line vote.

It passed the House a day later on a narrow 74-70 vote, with eight Democrats joining all 62 Republicans present in voting no. Another seven House members were absent for the vote.
The House and Senate votes marked the fourth time lawmakers acted to close recurring deficits since passing the 2016-2017 budget last June, a budget that featured the second highest tax increase in state history.
The latest budget fix includes no tax or fee increases, does not tap the state’s Rainy Day Fund, and cuts about $860 million in spending.
It also assumes the loss of as many as 2,500 state employee positions through attrition, retirements, and layoffs.
Approximately $1 billion in previously approved borrowing was cancelled and six legislative panels that advocate for various constituency groups were merged into two.
The mitigation plan scales back, but does not eliminate previously approved increases in municipal aid and transportation.
Nonunion state employees will be required to pay more for healthcare benefits and annual pensions for nonunion workers hired after July 1, 2016 are capped at $125,000.
Overall state spending increases by just 0.4 percent compared with the current fiscal year.
The state’s nonpartisan Office of Fiscal Analysis projected that the spending cuts will reduce projected deficits in 2018 and 2019 by more than 40%.
CBIA president and CEO Joe Brennan called approval of the budget deficit mitigation package "a first step in the long process of addressing Connecticut’s fiscal challenges."
"While the plan does not contain as many structural reforms as we would like, the spending reductions are recurring and will significantly reduce the size of the projected shortfalls in future budgets," he said.
"The spending cuts are real, and they are difficult, but necessary.
"They are necessary because we are still paying the price for last year’s tax increases that cost us much-needed investment and jobs."
After this year’s General Assembly elections, lawmakers will still be grappling with a $1.3 billion deficit for 2018 and a $1.4 billion deficit the following year.
"Make no mistake—tax increases next year will be as harmful and ill-advised as they would have been this year," Brennan said.
"The next step is to aggressively pursue additional structural reforms to state government and to adopt effective measures that ensure Connecticut has a workable spending cap that helps avoid future fiscal crises."
Republicans were critical of the latest budget fix, as it did not include a number of key reforms, including a viable spending cap, state employee concessions, and mandatory General Assembly votes on state employee union contracts.
GOP lawmakers also wanted to cut the $11 million in public financing of campaigns for legislative candidates in this November’s elections. That program survived the spending cuts unscathed.
"If Connecticut’s economy is to reach its full potential, we must take the best ideas from Republicans and Democrats and have a legislature committed to fiscal discipline, economic competitiveness, and growth," Brennan said.
"We look forward to working with those policymakers who share our goals for Connecticut as we take on the challenges before us."

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For more information about state spending, contact CBIA’s Louise DiCocco (203.589.6515) | @LouiseDiCocco
For more information about state taxes, contact CBIA’s Bonnie Stewart (860.944.8788) | @CBIAbonnie