Connecticut finally has a budget — well, almost.
After a nearly seven month budget battle between Connecticut Gov. M. Jodi Rell and Democratic legislative leaders, both houses of the General Assembly successfully passed a budget late Monday for fiscal years 2010 and 2011. Funding for the New Haven and the state’s 168 other towns and cities remained mostly flat, and the payment in lieu of taxes (PILOT) program — a major revenue source for New Haven — will remain funded at fiscal 2009 levels.
But both sides concede that the final version is far from perfect, and Rell has said she will not sign the bill in a sign of protest over insufficient spending cuts, instead allowing it to pass into law without her signature.
“I do not want, by my signature, to put a stamp of approval on [Democrats’] spending, their inability to make cuts or their levels of borrowing, revenues and taxes,” she said Tuesday on the steps of the State Capitol.
Connecticut was, until Monday, the only other state in the union without a budget — Pennsylvania is still working through its own budget process. However, representatives from both sides of the aisle say the current bill has its flaws, with some criticizing the state’s first-ever progressive sales tax, nearly $1 billion in borrowing and a reliance on a number of one-time revenue options, in order to balance the budget. But Nicholas Perna, an economic adviser to Rell and a lecturer in the Yale Economics Department, said having a budget at all is in many ways more important that what it contains.
“At long last, we have a budget,” he said. “It was getting increasingly worrisome by the day as we neared the Sept. 1 deadline. Let’s keep our fingers crossed that this works.”
Although the state’s fiscal year began July 1, Rell and the Democratic legislative leadership could not agree on a solution to the state’s multibillion-dollar budget woes. Rell, a Republican, only recently conceded that tax increases were needed to close the estimated $8 billion deficit over the next two years. Democrats demanded increasing the burden on the wealthy in order to preserve funding levels for social services.
Under the deal, the state sales tax will be reduced by one-half of one percent beginning in 2010, assuming state revenues do not decline below projections. Beginning Oct. 1, the state tax on tobacco products will rise, and income taxes on families making more than $1 million will increase to 6.5 percent, from the flat rate of 5 percent. Also, a host of fees for everything from gun permits to fishing licenses will rise.
But Perna said the real test will be whether this budget will hold up in terms of its revenue and spending projects — and how much of these reductions are one-time options.
“We are benefiting from one-time stimulus money and other consolidations,” Perna said. “If receipts don’t meet the projected values, then we can be in a real tough spot — and down the line, the credit agencies won’t want us to come looking to borrow more.”
Indeed, the current budget included nearly $1 billion in borrowing that the state will not begin to pay back during the next two years. It is as yet unknown how the state’s creditors and the credit rating agencies will react to the borrowing.
Rell exercised her power to veto specific items in the bill, canceling over $8 million in projects she deemed to be “pork,” including a $1.4 million program for children whose parents are incarcerated.
House Speaker Chris Donovan defended that spending, arguing that the governor’s office had already approved it.
“That was a negotiated amendment that had the blessing of her office, and included important programs for children and jobs creation,” he said.
Democrats hailed the budget but expressed dismay that Rell was playing a partisan card after already agreeing to the budget in negotiations.
“The people of Connecticut today have a fair and balanced budget that will move the state forward,” Donovan said in a statement Tuesday. “Though I was disappointed to hear the governor make such disparaging remarks about our work together, which is not helpful as we move forward, we should all be pleased that she had the wisdom to allow this budget to become law.”
Under the state constitution, the bill will become law without Rell’s signature on Saturday, five days after it passed in the General Assembly.