Budget negotiations are about to heat up at the State Capitol, with lawmakers and the governor’s administration aiming to agree on a new, two-year plan that can tame a huge budget deficit and recharge Connecticut’s economy.

It’s a very daunting challenge. A new report says that Connecticut lost 7,000 more jobs in March, adding up to 58,000 lost jobs in a year and 22,500 in 2009 alone. Meanwhile, policymakers are also awaiting the latest news on state income tax receipts from the April 15 filing deadline—more data that could greatly affect negotiations.

Policymakers are sharply divided on how to solve the budget crisis, with Democrat majority lawmakers favoring a plan that draws on tax increases to catch up to the deficit, and Republicans, led by Gov. Rell, calling for less state spending and smaller government.

Budget talks will start next week, but the Finance Committee’s tax proposals are already starting to affect the state’s economy, as some companies begin to question Connecticut as a business location.

Now, however, there are two plans on the table that avoid tax increases to close what could be a $8.7 billion—or worse—state budget deficit over the next two years. This week, legislative Republicans unveiled an alternative, $36.5 billion budget that, among other things, doesn’t raise taxes and contains some innovative ideas to make state government more efficient and effective.

Earlier this year, Gov. Rell offered a no-tax-increase budget that calls for smaller government and less spending.

Taking a different approach, legislative Democrats passed a $38.2 billion plan that raises taxes by $3.3 billion over the next two years, including a number of business tax increases that will actually make Connecticut’s economic road to recovery far more difficult.

  • CBIA's Joe Brennan talks about the budget negotiations

It’s no secret what the people and businesses of Connecticut want: For months they have been asking state government to make the very same financial sacrifices they are making in their homes and workplaces.

It’s not about whether state government should be “run like a business,” but about the simple fact that when the dollars aren’t there, spending must slow down and goals must be accomplished more efficiently. Households and businesses don’t have the ability to require someone else—taxpayers—to fund them when the till is running dry.

Two consecutive statewide polls by Quinnipiac University have shown that Connecticut residents, by a large margin, want lawmakers to start by making government smaller before considering any tax increases.

Many employers are struggling very hard to stay open and hold onto jobs. They caution lawmakers that higher taxes will force them to make serious decisions about jobs and even if, or where, they will continue to do business.

Interestingly, the Massachusetts legislature this week took a very bold stance on their budget crisis. Majority Democrats in the House rejected demands for new taxes and proposed spending cuts “of massive proportions.”

Bay State lawmakers are starting to deal with what one leader called “the fiscal reality” by aiming to avoid harmful tax increases. CBIA continues to urge lawmakers there to do the same here.