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Gov. Dannel Malloy offers tax hikes and more municipal cuts in budget proposal

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Gov. Dannel Malloy is recommending adding 25 cents to the cigarette tax, raising the hotel occupancy and real estate conveyance taxes and making additional cuts to municipal aid in his final budget proposal.

connecticut budget malloyThe proposal, which he will present to the legislature during his annual budget address on Wednesday, calls for $20.73 billion in total spending in the next fiscal year.

“The budget we are proposing today is about the future – specifically Connecticut’s long-term fiscal stability,” Malloy said. “This plan continues to pay down the state’s long-term obligations, further reduces our reliance on one-time revenues and identifies clearer and more achievable savings targets in the underlying budget.”

The governor’s adjustment proposal:

  • Includes expenditure and revenue changes totaling more than $266.3 million, as a response to the underlying $165 million shortfall identified by the latest consensus revenue forecast, and an additional $100 million of changes to correct what Malloy termed “the unrealistic spending assumptions in the adopted budget or for unrecognized needs.”
  • Reduces projected out-year deficits by half; decreasing by $1.35 billion in FY20, $1.43 billion in FY21, and $1.49 billion in FY22.
  • Takes steps to ensure the long-term solvency of the Special Transportation Fund and restoration of billions of dollars in transportation projects currently deferred.
  • Pays the entire State Employees Retirement System and Teachers Retirement System state contribution and proposes changes to smooth the looming TRS payment spikes.
  • Does not change major tax rates, but revenue changes include repeals of exemptions and credits or cessation of enacted rate changes.
  • Establishes a series of new steps to allow Connecticut’s residents to receive more friendly tax treatment following the federal tax changes, including changes to pass-through entities, decoupling expensing and bonus depreciation, and allowing municipalities to create charitable organizations supporting local interests.
  • Annualizes FY18 budgeted lapses, but preserves funding for alliance districts and towns most in need by reducing grants in wealthier communities.
  • Fully funds Juan F. compliance costs. Juan F. stems from a lawsuit that charged the Children and Families Department’s predecessor agency with failing to provide necessary services for children and youth who had been, or who would potentially become, abused or neglected.
  • Increases funding to address the emergency placements within the Department of Developmental Services system, thereby alleviating pressure on the wait list.
  • Adds additional temporary supports for those displaced by Hurricane Maria.
  • Reduces the assessment on the insurance industry by 3.7 percent.

“When it comes to our budget, there are few easy answers left for state leaders – what matters most is that we achieve balance with realistic and responsible changes,” Malloy said.

Senate Republican President Pro Tempore Len Fasano, a longtime political foe of Malloy – who is not seeking re-election – dismissed the governor’s proposal as “nothing more than a continuation of his legacy of tax increases, economic decline and penalties on the most vulnerable.”

Citing the bipartisanship that helped pass the biennial budget last year, Fasano said that Malloy “is rejecting our progress. He is rejecting a new direction. He is living up to the labels that have ruined Connecticut’s image across the country. I think everyone in Connecticut knows by now that following Gov. Malloy’s leadership only brings fiscal disaster.”

Download: Malloy’s Fiscal Year 2019 Midterm Budget Adjustments proposal
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