Malloy Sees No Quick Resolution As Budget Stalemate Continues

CAFCA | August 30, 2017 |

Gov.Dannel P. Malloy spoke pessimistically Wednesday about the state budget — rejecting any increase in the state income tax and saying he does not see any quick resolution to the monthslong stalemate.

During a one-hour meeting with The Hartford Courant’s editorial board, Malloy said that cities and towns need to tighten their belts because the state can no longer afford to keep sending them millions of dollars every year.

“I don’t see that the House is anywhere near passing a budget that I could sign,’’ Malloy said Wednesday. “Certainly everything I know about the budget that they’ve deliberated on over the past couple of weeks — means I would not sign that budget.”

He added, “Whatever the House passes, in line with what they’re talking about, wouldn’t get through the Senate. So, we really have made almost no progress. … It’s clear to me that they’re not dealing with the budgetary reality. I think, quite frankly, they’re grasping for straws in an attempt to cobble together a budget.”

Malloy said there was no chance that he would allow the state budget to become law without his signature — in the way that Republican Gov. M. Jodi Rell did in September 2009 that ended the longest budget battle in state history.

When Malloy was asked whether the stalemate could last into December, his budget director, Ben Barnes, responded, “We can operate with all of the schools open and everything moving along until March.’’

As millions of state dollars are being withheld under the executive order, Malloy and Barnes said communities like Hartford, Waterbury, Scotland, Sprague and West Haven could be facing financial problems later in the fiscal year.

"We don’t want to have towns become insolvent or bounce paychecks or miss vendor payments,’’ Barnes said. “On the other hand, if they’re going to ask us for extraordinary help, we’re going to get in their business a little bit and make sure that they’re doing the things that they should be doing to get through a very austere and uncertain time.’’

Malloy also spoke strongly Wednesday against any increase in the state income tax, saying it would be damaging to the economy and prompt some rich residents to flee the state.

Even though an income tax increase is not currently in any of the fiscal plans circulating at the state Capitol, some lawmakers have not backed off the idea.

“A further raise in the income tax would be extremely detrimental to the long-term health of the state,’’ Malloy told the editorial board. “Extremely detrimental.’’

He added, “We should put up a one-way toll for everyone who moves to Westchester County.’’

The income tax on the state’s millionaires was raised in 2009, 2011, and 2015 and is now at a top rate of 6.99 percent.

Income-tax proponents have said they have at least 45 votes in the House Democratic caucus for an increase in taxes on the wealthy. But House Speaker Joe Aresimowicz of Berlin said earlier this year that 45 votes is well short of the necessary 76 votes to pass in the 151-member chamber.

Senate President Pro Tem Martin M. Looney of New Haven, the highest-ranking senator, said he doesn’t see it happening.

“There’s no serious proposal at this point out there on income-tax change,’’ Looney told reporters.

Looney, though, said he expects a vote on the two-year, $40 billion budget during the week of Sept. 11.

“There’s a growing sense that we need to vote that week to forestall the governor’s executive order from taking effect,’’ Looney said. “The Democrats will need to have an agreement with the governor in order for the lieutenant governor to cast the tie-breaking vote.’’

House Majority Leader Matt Ritter of Hartford agreed that the legislature must avoid large cuts to cities and towns that would take effect on Oct. 1 if Malloy’s executive order continues.

During the discussion with the editorial board Wednesday, Malloy was pessimistic about the long-running soap opera at the Capitol. If the income tax becomes a major part of the discussion, he said the battle could last even longer.

“I don’t think that there is any likelihood’’ of a budget passing with an income tax increase, Malloy said.

The House is scheduled to vote Sept. 14, but the final details are still up for discussion. In the state Senate, three moderate Democrats have all raised concerns about possible tax hikes — stalling the budget since the chamber is evenly divided with 18 Democrats and 18 Republicans.

With the state budget still in a stalemate, about 25 mayors and first selectmen traveled to the Capitol to plead their case Wednesday for more money and a quick budget resolution.

The local officials want to avoid a revised plan by Malloy to eliminate all education cost-sharing funds for 85 towns and reduce the total for about 54 others. The towns would collectively lose hundreds of millions of dollars if the legislature cannot pass a budget and Malloy’s revised executive order takes effect.

Darien First Selectman Jayme Stevenson said that residents in her Fairfield County town pay large amounts of state income tax, and she is simultaneously against proposed cuts in special education.

“We’ve already swallowed those decreases in state funding. … I feel like we’re doing our part, and we’re doing it without complaint. But enough is enough.’’

In an important development, Rep. Danny Rovero, a key swing voter in the House Democratic caucus, said he will vote against the budget due to the proposed hike in the sales tax to 6.85 percent, up from the current 6.35 percent.

“I’m not in favor of the sales tax,’’ Rovero told The Courant on Wednesday. “I’m not in favor of any tax. I’m not saying it won’t pass, but it won’t be with my vote.’’

Since the Democrats hold an advantage of 79 to 72 in the House, only three conservative Democrats could break away. With four defections, the Democrats would not have the necessary 76 votes in the chamber.

Rovero, one of the most fiscally conservative Democrats, says the legislature needs to cut state spending and shift more work to nonprofit organizations that hold contracts to provide state services like group homes. The nonprofits provide the services at a lower cost than the state, where employees have more lucrative benefits and larger pensions.

While Rovero is against tax hikes, he is willing to listen to the plan by Malloy and the House Democrats to raise the cigarette tax to $4.35 per pack, up from the current $3.90 per pack.

The Malloy administration has warned the towns repeatedly that they would be receiving fewer state funds than in the past.

“While we can disagree on our opinions, we should not disagree on the facts,’’ said Chris McClure, Malloy’s chief budget spokesman. “And the fact is, over the last five years, municipal aid increased 21 percent as billions of dollars have been slashed elsewhere in the state budget.’’

In his discussion with the editorial board, Malloy said he is trying to wrestle down the state’s finances, balance the budget, and avoid more downgrades by the Wall Street ratings agencies that have also plagued other states.

“I’m trying to stop us,'' Malloy said, “from being Illinois.’’