HARTFORD - Gov. Dannel P. Malloy released a revised two-year state budget Monday that cuts aid by another $362 million in the first year to numerous Connecticut cities and towns while boosting the funding for poorer communities, including Hartford.
His latest proposal, which will be the basis for negotiations between the Democrat and legislative leaders that begin Wednesday, was met with immediate resistance from the Connecticut Council of Small Towns. Many of the group's members would take a big financial hit under Malloy's plan, predicting they would be forced to raise local property taxes.
“Governor Malloy's revised budget is a disaster for small towns,” said Betsy Gara, the group's executive director. Besides the cuts, she notes how his revised plan still calls for cities and towns to pick up a share of the cost of teacher pensions, even though the revised plan now caps the amount they might have to pay.
Cities and towns would no longer receive funds from the state's share of slot machine revenue generated at Mohegan Sun and Foxwoods Resort Casino under Malloy's plan. The governor also is calling for redistribution of the Education Cost Sharing grant, the largest state grant for public schools.
“The reality is ... that the state does not have the resources to continue to provide the same level of aid to local governments,” said Malloy, a former mayor of Stamford.
In total, Malloy's new $39.2 billion budget over two years reduces spending by an additional $604 million in the first year than the two-year $40.6 billion budget he released in February. The changes were prompted after anticipated income tax revenue dropped sharply, especially among the state's wealthiest taxpayers. The projected deficit for the fiscal year beginning July 1 jumped from $1.7 billion to $2.3 billion.
House Minority Leader Themis Klarides, R-Derby, called Malloy's revised budget “a good faith effort,” noting how it incorporates some Republican ideas.
“I think this most recent budget proposal recognizes that huge tax increases that Democrats have relied on and pushed through the legislature did not work and that Connecticut residents will not be accepting of that strategy again,” she said.
Malloy noted how his revised plan does not increase the personal income tax or state sales tax rates. However, it does eliminate the state sales tax exemption on non-prescription drugs and increases the real estate conveyance tax rate on property valued at more than $800,000. Both measures are expected to save the state a total of nearly $67 million a year.
The plan also does not include a proposal highlighted Monday at a state Capitol news conference to impose an excise tax on beverages containing added sugar. Advocates, including the American Heart Association, say the penny-per-ounce tax could raise $145.2 million annually. Malloy, however, said he doesn't support the “soda tax” concept.
Malloy stressed how his new budget also continues to make necessary payments to the state's pension plan as well as devote hundreds of millions of dollars to Medicaid and local government aid, despite the reductions. It also implements a Republican proposal to use revenue generated from sales tax on motor vehicles to help temporarily financially shore up the state's transportation spending account.
Malloy's plan still relies on $700 million in state employee concessions in the first year. However, his administration has yet to reach a final agreement with union leaders, prompting the first of more than 1,000 layoff notices to be issued. As of Monday, 113 people — union and management employees — had received notices. Most work at the Department of Social Services.
Even if a deal is reached, Malloy's budget director, Ben Barnes, said “there's no question” the proposed spending reductions would still impact the overall number of state jobs. He said it remains to be seen whether those cuts could be accomplished through attrition or layoffs.