Democrats and Republicans on the legislature's Appropriations Committee released separate budget proposals April 20 that, after parliamentary maneuvering, resulted in a Democratic spending plan inching to the House floor.

Last October, a strong bipartisan majority of the legislature approved a two-year budget for the fiscal period that ends June 30, 2019.

Red Ink: State Budget OutlookBut with the current year's budget and next year's each running deficits in the hundreds of millions of dollars—ballooning to the billions of dollars in fiscal 2020 and 2021—Democrats and Republicans proposed separate budget adjustments.

Democrats released their budget adjustments (HB 5588) April 20, and after a successful vote to split the committee by chambers, the panel's House members approved it by a 21-19 party-line vote.

Then, the full committee rejected the Republican budget proposal (SB 533) by a 27-25 party-line vote.

Plans Use One-Time Tax Windfall

The Democratic budget is a $20.87 billion plan—an increase of roughly $216 million over the budget adopted last fall.

The Republican plan is $20.44 billion, about $425 million less than the Democratic proposal.

Both plans took advantage of unexpected income tax returns, which surged to $1.1 billion, or $915 million ahead of earlier projections.

That windfall is expected to be a one-time event, based on state residents taking advantage of expiring federal tax provisions and a surge in capital tax gains as the stock market underwent a correction.

Under provisions enacted in the budget approved last year, those surplus funds would otherwise go to the state's Rainy Day Fund.

Governor Dannel Malloy criticized both parties for using the funds.

Spending Increases

The plan put forward by Democrats represents a roughly 2.1% increase in spending, largely restoring cuts to social services and education made in the budget's first year.

But that plan has two crucial flaws.

First, senators on the Appropriations Committee—evenly split among both parties—did not have enough votes to pass it.

Second, it exceeds the spending cap by $31 million, according to the legislature's non-partisan Office of Fiscal Analysis.

Therefore, it would require the governor to declare a state of emergency and needs a two-thirds vote in both chambers to enact it.

Spending Cuts

The Republican plan is more austere.

It reduces spending in the budget's second year by $253 million, is under the spending cap by $293 million, and cuts spending in the second year by 2% over the first year.

The GOP plan institutes a hard hiring cap on state agency positions, restores some money to municipalities, eliminates some fee increases, and does not include the governor's plan to have certain businesses pay corporate taxes instead of income taxes.

The plan also anticipates yet to be fully determined savings from 2027 when the current contract with a coalition of state unions expires. The Republican plan uses those future anticipated savings now.

Malloy opposed this controversial formula and threatened a veto of any plan that includes this calculation.

Some observers, in addition, believe such actions could trigger a lawsuit by state employee unions.

Although both spending proposals, in their current forms, have little chance of being enacted, they likely set the stage for more negotiations among legislative leaders.

Since the budget enacted last October was for both fiscal years, lawmakers have the option of doing nothing, leaving the current plan in place, and letting the next legislature tackle the problem.

The General Assembly session ends May 9 at midnight.

 Democratic Plan (HB 5588)Republican Plan (SB 533)
Total spending$20.9 billion (2.1% increase over current 2018-2019 budget)$20.4 billion (0.7% decrease)
Balanced?No. Exceeds expected revenues by $375 million.Yes.
Exceeds spending cap?Yes, by $31 million.No.
Suspends new volatility cap?Yes.Yes.
HighlightsAdds almost $100 million in education funding (including free community college tuition), mitigates Medicare Savings Program cuts, increases transportation funding, restores some municipal aid.Cuts most state agency budgets by 5%-7%, claims $62 million in immediate savings from proposed 2027 pension changes, shifts more state services to non-profit providers, mitigates Medicare Savings Program cuts, restores some municipal aid.

For more information, contact CBIA's Louise DiCocco (203.589.6515) | @LouiseDiCocco