With Connecticut facing a $1.7 billion deficit in the coming fiscal year, Gov. Dannel Malloy presented his budget Wednesday before a joint session of the Connecticut General Assembly.
The proposed $18 billion budget includes $1.36 billion in new spending cuts to state programs across the board. The remainder of the money needed to close the deficit will come in the form of state employee concessions and tax increases.
Throughout the address, Malloy emphasized the need to ensure equality among the state’s towns and municipalities by offering support to those facing the greatest fiscal challenges. Above all, he stressed the interdependence of the many communities in Connecticut.
“As we negotiate this budget, we should remember that we are in this together,” he said. “It’s about more than just how my town or my community or my family did. It’s also about neighboring towns, neighboring communities and neighboring families, as well. We will rise or fall together, as one Connecticut.”
The budget assumes that the state will save $700 million in state employee concessions but also includes a plan for how the state could make up that money if the administration fails to reach an agreement with state employee unions. In that case, the state would be forced to lay off as many as 4,200 employees, according to the proposed budget.
Meanwhile, tax increases will cover just $205 million of the deficit.
This is not the first year Malloy has had to balance the budget. In 2011, the governor faced a record-setting $3.67 billion deficit. Since then, the state has dealt with deficits, though smaller, each year. The state’s constitution requires that the governor balance the annual budget to make up for the entire projected deficit.
Much of the deficit stems from three different state-funded pensions, which help pay state employees and teachers during retirement as well as state employee health care costs, University of Connecticut economist Stephen Ross said.
“Those three together are massive; they’re unfunded liabilities that have built up for 30 to 40 years,” Ross said. “Any one of the three would be difficult to handle. Each one of them represents billions and billions of dollars in obligations for the state.”
Along with savings from bargaining with unions, the proposed budget would seek $256 million in cuts to government agencies and $408 million in reductions to the Teachers Retirement System. Though the state would still contribute two-thirds of the cost to that system, it would call on towns and cities to fund the rest.
Despite these changes to teacher retirement funds, several municipalities will see increases in state education funding. And with the rise in financial support for education, the state will hold these municipalities to a higher level of accountability.
With Malloy’s proposal, Connecticut would develop the Municipal Accountability Review Board to evaluate local government finances and to ensure fiscal stability. Malloy also aims to increase Special Education funding by $10 million and separate that funding from the general cost sharing formula, which uses attendance and demographic measures to determine how money is allocated to school districts.
“Education is economic development,” Malloy said in his presentation. “A pipeline of skilled and prepared workers is essential for thriving industries and growing businesses.”
But Senate President Pro-Tempore Len Fasano, R-Durham, said he was unsatisfied with the vision Malloy laid out in his speech.
“What I think the governor presented today, unfortunately, was not a clear vision of how to move the state of Connecticut forward,” he said. “It is a mixture of ideas to solve a problem, which are not sustainable in terms of moving Connecticut toward a better economy.”
Fasano identified a number of issues he thinks could become “sticking points” in the coming negotiations. Among Fasano’s chief concerns were the governor’s revision of the educational cost sharing formula to count current enrollment and have more accurate measurements of wealth and poverty. He also questioned Malloy’s plan for municipalities to shoulder a third of the cost of teacher pension plans.
Senate Majority Leader Bob Duff, D–Norwalk, said much work remains to be done on Malloy’s proposals.
“This is a budget that clearly shows no easy answers and difficult decisions, difficult times ahead,” he said. “I don’t think that anybody would look at this budget, including the governor, and say that’s anything that everybody wants or doesn’t want.”
Still, Duff said he was pleased that the budget fully met the state’s debt obligations, increased education funding for communities in need and initiated a conversation about how the state pays for municipal services.
The budget leaves $75 million of unallocated money for local aid in the following fiscal year and $85 million in the year after. Legislators will be able to appropriate these funds as needed.
For the local aid already allocated in the proposed budget, New Haven is drafted to receive $16.6 million in additional revenue, which would total the state’s contribution to the Elm City for the next fiscal year at $245 million. Other cities such as Hartford, Bridgeport and Middletown will also receive more financial support from the state. But others like Greenwich, Groton and Milford will receive millions less.
Malloy took office in 2011.