Lamont, key lawmakers move closer to budget deal after key compromises
Governor Ned Lamont and legislative leaders failed to reach agreement on a new two-year state budget on Friday, but they said the next step was imminent.
While details remain to be worked out, Lamont, Speaker of the House Matt Ritter and Speaker of the Senate Pro Tem Martin Mr. Looney said they have resolved disputes over municipal aid and the spending cap.
The governor’s proposed Transportation Climate Initiative has been shelved, at least for this year, as has a proposed $ 50 million tax on health insurers. And a proposed tax on the use of highways on large commercial trucks would still be passed, but separately from the budget.
Both sides continue to talk about a new tax on recreational marijuana sales, but it was not clear on Friday whether that would be incorporated in the next budget.
“I think we are coming to a budget,” Lamont said after the second of two afternoon meetings with leaders of the Democratic majorities in the House and Senate.
Looney said: “We are certainly, I think, closer to a resolution than we were yesterday.” But he qualified that by noting: “There are a number of details that were discussed in the concept that need to be thoroughly checked.”
As proof of the improved outlook, President Matt Ritter rescinded plans for the House to vote on Saturday on a budget its members had approved – a package that Lamont opposed. Leaders now say they hope to start voting on Monday on a plan the governor will sign.
Lamont gives way on the issue of the spending limit
Lamont and lawmakers have both insisted they removed one of the biggest stumbling blocks, a legislative plan to bypass the statutory spending cap.
The credit committee wants to increase both state aid and education aid to municipalities in the next biennium, but has been unable to keep it under the cap – a tool designed to maintain credit in line with statewide household income growth.
The panel recommended a “revenue interception,” an accounting maneuver that involved capturing around $ 350 million in sales tax receipts before they reached the general fund and allocating them to an off-budget account for support local aid.
Such interceptions have been used on numerous occasions since the cap was established in 1991.
“There have been a lot of gimmicks over the years, over the years and I wanted to work hard to make sure that… Connecticut taxpayers knew we had an honest and balanced budget,” Lamont said.
But when things unfolded, both sides agreed that half of the enhanced aid would stay in the traditional budget and some would go over the cap.
“We have, so to speak, divided the difference there,” added the governor.
The governor was also wary of Ritter’s proposal to borrow up to $ 2 billion over the next decade to support investment projects and programs in poor cities. Lamont says a two- or three-year bond pledge, for now, is wiser, adding that billions of dollars in federal emergency coronavirus relief flooding Connecticut over the next two years should be sufficient. to meet many needs in the meantime.
And while the final details of that issue remain to be worked out, Lamont and Ritter said they no longer think it is a stumbling block to a budget deal.
Tax increases will not be in the next budget
The governor also said he was happy that the deal he and the leaders were working on would not include any increase in state taxes.
Controversial proposals by the Finance, Income and Surety Committee to impose two income tax surcharges on households earning more than $ 500,000 a year have been scrapped, as has a financial panel plan for a new tax on income. advertisements in digital media.
The governor said the increases would have hampered Connecticut’s economic recovery after the pandemic.
But lawmakers also urged Lamont to forgo some tax increases he wanted.
The governor had been pushing for Connecticut to join Rhode Island, Massachusetts and Washington, DC in a regional climate transport initiative.
Designed to reduce automobile emissions, TCI would impose fees on fuel producers. But because those costs would likely be passed on to motorists at the pumps, critics say it amounts, in effect, to an increase in the gasoline tax. The state is expected to earn more than $ 60 million per year from this initiative by 2023.
Projections indicate it could add as much as 5 cents a gallon to the price of gasoline by 2023, but opponents blame it the impact would be greater.
“Frankly, what middle and low income Connecticut families need is a break, not an extra burden,” said Senatorial Minority Leader Kevin Kelly, R-Stratford, who has describes the TCI as a “seizure of money”.
“It is just very dangerous to raise gas prices right now,” added minority parliamentary leader Vincent J. Candelora, R-North Branford. And with several northeastern states not participating in the TCI, he said, only the Connecticut economy would be affected by its participation.
Lamont tried to rally support for TCI on Friday, noting that the funds would improve air quality and overall health statewide, especially in poor urban centers in Connecticut.
But Looney said that while reducing air pollution is a laudable goal, fuel taxes are one of many regressive taxes in Connecticut, meaning the rates are the same regardless of household income. . Regressive gasoline, sales and property tax systems are already placing a heavy burden on Connecticut’s poor and middle classes.
And Looney said if Lamont insisted that tax hikes on the rich would hurt the economy, tax hikes of all kinds should be ruled out.
“If we’re not talking about income, then we’re not talking about income,” Looney said.
Lawmakers also insisted that Lamont’s highway use tax, which would generate nearly $ 90 million a year from large commercial trucks, also be excluded from the budget.
But Lamont says the state’s Special Transportation Fund still needs revenue to fund upgrades to highways, bridges, and railroads over the coming decades.
As a compromise, legislative leaders said truck fees would be voted on in this session, but separately from the budget package.
Middle class tax break cut, working poor relief still in play
Another victim of the growing budget consensus concerns a reduction in state income tax for low- and middle-income households.
The finance committee had recommended that a new child tax credit in the state income tax system be launched immediately. That would have meant a credit of $ 300 per child, up to a maximum of $ 900, for low- and middle-income households starting next year. The total credit would reach $ 600 per child, reaching $ 1,800 per household in 2023.
The Lamont administration had expressed some concerns about the state’s ability to extend credit, which would have cost the state $ 300 million per year when fully implemented.
Legislative leaders initially agreed to postpone the tax break until 2024. But according to Paul Mounds Jr., chief of staff to Lamont, Looney and Ritter offered on Friday to take it off the table altogether.
Representative Sean Scanlon, D-Guilford, who co-chairs the finance panel, insisted on Friday that the debate over tax breaks was not over.
“I think we need to find a way to get the people of Connecticut to understand that we are not kicking the box. [down the road] about it, ”he said.
The new budget will include a state income tax cut for the working poor in Connecticut, Ritter and Looney said. The state earned income tax credit, which is currently equal to 23% of the federal EITC and provides approximately $ 118 million per year to just under 200,000 households, would rise to 30%.
The new budget will also increase the eligibility of low-income residents to receive government grants to help them purchase health insurance on the state stock exchange. Lamont’s budget manager Melissa McCaw said about 30,000 residents would be helped by the initiative.
Religious and labor leaders gathered outside Capitol Hill on Friday, insisting that the governor’s and key lawmakers’ plan does too little to help Connecticut’s poorest and most vulnerable citizens.
About three dozen members of the Recovery For All Coalition held a mid-day prayer vigil in the parking lot of Capitole de Lamont, carrying signs reading “Tax Wealth” and “The Poor Deserve Justice.”
“We need a recovery that does not bless the rich among us, but also the poor among us,” said Reverend Rodney Wade, pastor of Long Hill Bible Church in Waterbury. “And we stand here in this place to tell the governor that there are a lot of people who believe he has to do the right thing in spite of himself.”