After weeks of contentious negotiations, the state Senate approved a deficit-reduction package early Thursday morning that includes an across-the-board tax increase and a reduction in aid to cities and towns by $40 million.
The bill, which was passed by the House on Wednesday, encountered opposition from an unusual coalition of labor supporters, city leaders and conservative Republicans. City officials said the package, which applies to the fiscal year ending in June, will force New Haven to incur its first budget deficits since Mayor John DeStefano Jr. took office in 1994.
Frank Altieri, New Haven’s budget director, said the reduction in state aid — $3.3 million for the current fiscal year — will force the city to transfer money from a $17.7 million fund balance.
“These reductions are at such a late time that even if we had layoffs, we would have no hope of making up that difference through reduced expenditure,” Altieri said.
In addition, Altieri said the city is expecting state aid to remain low during the next fiscal year, likely requiring New Haven to raise property taxes and negotiate with the city employees’ unions for concessions. DeStefano, who was in Washington, D.C., Thursday, is scheduled to issue his budget proposal for the next year on Monday.
Gov. John G. Rowland, who is expected to sign the deficit-reduction plan today, postponed his introduction of the state’s budget until next week. Rowland’s budget address, which was originally scheduled for Thursday, was considered by many legislators as a deadline for passing a bill.
The compromise plan, which passed the House, 79-68, and the Senate, 18-15, was the product of nearly a week of late-night negotiations that ensued after Rowland vetoed an earlier Democratic proposal last week. The bill angered some Democrats who wanted the state to rehire 2,800 laid-off workers, while many Republicans opposed an increase in tax rates.
Even supporters of the bill — which will raise taxes by half a percentage point for all individuals earning over $22,500 — were unenthusiastic about the final outcome of the process. But Rep. William Dyson, chair of the Appropriations Committee, said the state’s dire fiscal situation compelled the General Assembly to act.
“I don’t like it, but given the environment we were in, the options weren’t many,” said Dyson, a New Haven Democrat. “If we didn’t do it, we ran the risk of ending the fiscal year with a huge deficit.”
Senate Majority Leader Martin Looney, who voted for the bill, said the compromise was necessary to avoid damaging the state’s credit by borrowing money.
“It was certainly a very difficult budget,” he said. “Obviously, the cuts that were included were painful, and the budget process going forward will be incredibly painful.”
Looney, also a New Haven Democrat, said the cuts in aid to municipalities were significantly less than those originally proposed by the governor.
“The amount of municipal aid that was reduced was entirely responsible and proportional to the crisis,” he said.
But while the Democratic leadership supported the bill, many liberal legislators were angry about the proposal’s tax structure and Rowland’s refusal to rehire laid-off union workers. In contrast to the vetoed bill, which would have raised taxes primarily for high-income taxpayers, the compromise proposal extended the tax increases to the middle class.
Leo Canty, president of the Connecticut Federation of Educational and Professional Employees, said Rowland showed “disregard” for state workers.
“Clearly, the cuts that were involved in this budget were very large and horrendous,” Canty said. “For a wealthy state, as Connecticut is, we should be able to better take care of people in need.”
Rep. Toni Walker, who voted against the bill, said Democratic leaders acceded to Republican demands for a “flat” tax increase because they needed support from the across the aisle. She said the tax structure of the new proposal came as a surprise to many legislators.
“To me, I think our budget is not a spending problem, it’s a revenue problem,” Walker said. “The way we address it in this budget is far short of what we needed to do.”