The state Senate yesterday narrowly approved a $43.9 billion state budget for fiscal years 2014 and 2015 by a 19-17, vote, with three Democrats (Sen. Paul Doyle, D-Wethersfield; Sen. Joan Hartley D-Waterbury; and Sen. Gayle Slossberg, D-Milford)  joining all of the chamber’s Republicans in voting against the plan.

Early Sunday morning, the state House, in a party-line 95-48 vote (with Democrats approving and Republicans rejecting) approved the budget that increases spending by more than 10%, extends three business taxes that were set to expire, and shifts about $6 billion in Medicaid spending out from under the state’s constitutional spending cap.

The budget now goes to the Governor's desk for his signature.

Among the priorities of the $43.9 billion budget include a major investment in science and technology at the University of Connecticut, funding for the landmark public education reforms passed last year, continuation of economic development programs, and aid to cities and towns.

However, the budget raids several funds--including $220 million of the current-year surplus and $170 million from the Transportation Fund—and transfers those dollars into the General Fund. It also delays more than $390 million in payments due over the next two years for borrowing during the previous recession, which will incur $45 million in new interest owed. The plan also expands gaming in Connecticut with the introduction of Keno.   

Businesses are concerned about the budget’s spending increase and one-time revenues that do little to get Connecticut off its cycle of deficits, debt, and taxes. The budget will not instill the confidence that businesses need in order to plan ahead and make the job-creating investments necessary to drive the state’s economy.

The budget extends for three months a tax on certain generators of electricity; and for two more years, the 20% surcharge on the corporation business tax, and the reduction in the credit limit for the insurance premium tax—all of which were set to expire on June 30.  It also reduces aid to hospitals by more than $500 million over the two years.

Even after a record $1.5 billion state tax increase in 2011, policymakers had to address a $2 billion deficit for the next two fiscal years as Connecticut’s economic recovery and job creation continued to be slow in the making. 

Not being able to sufficiently lean the cost of government, budget-writing lawmakers were not able to make many of the tough decisions needed to limit the growth in state spending.

Instead, taking $6 billion in Medicaid spending off the books for spending cap calculations is an accounting maneuver to allow what is an unsustainable level of state spending—and avoid the necessary 60% legislative vote to override or redefine the cap. The maneuver also creates a loophole that will encourage lawmakers to increase spending again in the future when budget ends don’t meet.

Democrats argued that Connecticut is the only state to count the Medicaid spending as part of the cap, but that is how the state established the spending cap parameters in 1992 and has budgeted ever since.

What policymakers must come to grips with is that we have to stop spending beyond our means--and find more ways to reduce the budget and increase the effectiveness and efficiency of state government.

For more information, contact CBIA’s Bonnie Stewart at 860.244.1925 or bonnie.stewart@cbia.com.