Calls for Tax Hikes Follow State Employee Deal

Issues & Policies

State employee union leaders called for more tax hikes on businesses this week after announcing approval of a wage and benefits concessions deal.
More than 80% of the 44,000 state employee union members ratified the $1.57 billion agreement reached between the Malloy administration and union leaders in May.

Connecticut Job, GDP Growth

Connecticut’s economy has struggled to find momentum amid ongoing fiscal uncertainty.

The concessions are a key part of the Governor’s proposal to close the state’s two-year, $5.1 billion budget deficit.
Growing state employee retirement costs are one of the main factors driving the persistent deficits that have dominated state budget debates since the last recession.
The agreement includes a temporary wage freeze, increases in medical and prescription payments for state workers, changes to retiree healthcare, and a hybrid pension/defined contribution plan for new workers.
Union leaders now want lawmakers to support $1 billion in tax hikes targeting the state’s financial sector and investment earnings.

Ignoring History

CBIA president and CEO Joe Brennan said Connecticut’s sluggish economy cannot withstand more tax hikes, noting lawmakers approved the largest tax increase in state history in 2011 and the second largest four years later.
“History has proven that additional tax increases will only cause more harm to Connecticut,” Brennan said. “That approach doesn’t work. It only makes things worse.
“We’ve been down that road with two enormous tax increases in the last six years.
“What did we get? Declining tax revenues, growing deficits, and an economy that still lags much of the region and the country.

CBIA's Joe Brennan

History has proven that tax increases don't work. It only makes things worse.

"If Connecticut is going to reach its full economic potential, we urgently need a budget without any broad-based tax increases.
"Lawmakers must seize the opportunity to send a message that Connecticut is going to do business differently and instill more confidence in individuals and businesses."
The Malloy administration said the concessions agreement saves $10 billion over 10 years, and $20 billion over 20 years.
However, it also extends the current pension and healthcare contract another five years to 2027, raising concerns among lawmakers from both sides of the aisle and the business community.

Budget Deadlock

With the new fiscal year almost three weeks old, state lawmakers have yet to adopt a budget, and the governor is managing the state's spending through executive power.
Budget negotiations have been deadlocked for months, with lawmakers considering a number of proposals for addressing the state's fiscal crisis.
House Democratic leaders had scheduled a budget vote for July 18, the same day as the union agreement was announced.
That vote was canceled amid uncertain support for proposals to raise the state sales tax from 6.35% to 6.99% and levy additional taxes on restaurants and hotels.
The revised budget proposal Governor Malloy released in May contained no broad-based tax increases and included cuts to municipal aid.
Republican lawmakers want more than $2 billion in state employee concessions, saying Connecticut must bring wages and benefits in line with other states and the private sector.
House Speaker Joe Aresimowicz (D-Berlin) said this week he is hopeful lawmakers will vote on a budget by the end of this month.


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