Democrats Call For Sales Tax Increase; Possible Vote July 18

June 30--With time running out in the fiscal year, House Democrats failed to vote on a state budget Thursday and instead proposed a two-year spending plan that would increase the state sales tax to 6.99 percent to help fund cash-strapped cities and towns.

In addition, cities and towns would have the local option to approve an additional 1 percent tax on the sale of food and drink at restaurants and bars, and the additional revenue would be given back to the municipalities.

A vote on the two-year, $40 billion budget is now expected on Tuesday, July 18, one day after unionized state employees are scheduled to finish voting on concessions that would yield an estimated $1.5 billion in savings over the next two years.

While the House is prepared to vote, the state Senate -- which has 18 Democrats and 18 Republicans -- has not yet agreed to convene that day.

The announcement means the General Assembly will not approve a state budget -- either a two-year plan or a stopgap "mini budget" -- before the end of the fiscal year at midnight Friday, forcing Gov. Dannel P. Malloy to start closing the budget gap by executive order. This scenario that would lead to serious cuts for municipalities, hospitals, social services, and summer jobs for teenagers across the state.

Republicans said they could not support the proposed budget that would mean an overall tax increase at more than $850 million over two years. Malloy also sharply criticized the proposed tax increases but stopped short of saying he would veto the Democratic-written measure.

"There are probably more holes in this thing than Swiss cheese," Malloy told reporters. "Let's see if they can pass it. ... Why was this kabuki dance done about trying to get something done before July 1?"

Regarding the legislature's failure to pass a budget before the end of the fiscal year, Malloy said, "I've had enough."

The new proposal also came on a day when insurance giant Aetna urged lawmakers to come to a budget agreement when it was moving its corporate headquarters from Hartford to New York City. Despite a legislative session that stretched from January until June, lawmakers failed to agree on a balanced budget.

The House Democrats, who control the 151-member chamber by 79 to 72, said they have the necessary votes to pass the budget in their chamber, but Republicans questioned their vote count.

"We're good to go, we know where the parties are. Let's get this thing done pretty quickly," said House Majority Leader Matt Ritter of Hartford. "We have a date certain. We have momentum."

But like Malloy, House Republican leader Themis Klarides was quick to douse water on that momentum, saying her 72 members are unanimously against tax increases.

"I do understand that there are tax increases in there ... that we certainly cannot support," Klarides said. "Not only is every tax policy, all of our regulation, and all of our anti-business bills pushing business out of the state, now we are going to try and stop people from going to those businesses by taxing them all."

The House Democratic plan also supports restoring the popular $200 property tax credit that Malloy wanted to eliminate. The plan also calls for no new taxes on hospitals, along with future tax cuts in the 2020 fiscal year for college graduates and senior citizens who are collecting Social Security.

The proposal also calls for increasing pension contributions by teachers, an issue prompted by Malloy's request for the towns to contribute $400 million out of the $1.2 billion that the state pays annually to fund pensions for local teachers.

In the short-term, the House refused to vote Thursday on Malloy's so-called "mini budget" that would have funded state operations for the next 90 days.

With no action by the legislature, the state is now expected to start the new fiscal year on Saturday without a budget. That means Malloy's executive order would lead to major cuts for municipalities, hospitals, social services, and at least 400 summer jobs for teenagers in the Hartford region.

Ritter said the new budget proposal contains a number of provisions that could help the city of Hartford, which has sought an additional $40 million in state aid in order to stave off bankruptcy. "They have a big hole, and there are a number of different ways we're trying to address that," he said.

But the direct impact on the state's 169 communities was unclear because the town-by-town totals for state funding were not released Thursday. The nonpartisan, professional staffs that analyze the state budget proposals had not had enough time to complete their fiscal analysis, which will be available in the coming days.

If Hartford adopts the additional one-percent tax on food and beverages, the city would generate an estimated $3 to $4 million a year, Ritter said. Lawmakers are also working on a plan with the state's hospitals that would involve a voluntary payment to the municipalities that host them. The plan is not a new tax, as the governor had proposed, but the details are still being worked out, Ritter said.

The overall goal of the Democratic budget proposal is to wean municipalities off a funding system that is based on property taxes, Ritter said.

"One of my goals as a legislator has always been to let towns have more flexibility so their reliance on property tax isn't as strong," he said. "We are stuck in a 1960s model of taxation. We still have towns poaching Costcos from each other."

House Speaker Joe Aresimowicz, a Democrat from Berlin, said Democratic leaders will spend much of the next three weeks working to sell their plan at budget workshops and other gatherings.

"We think this is a great starting point," he said.

Many of the ideas, including a proposal that would allow municipalities to assess a local sales tax on food and beverages and a provision that would provide incentives to run certain local programs on a regional basis, were drawn from the Connecticut Conference of Municipalities, Aresimowicz said.

Raising the sales tax from 6.35 percent to 6.99 percent will "save the municipalities from some really devastating cuts," Aresimowicz said.

CCM's executive director, Joe DeLong, hailed the proposal, saying his organization had direct input.

"From level funding of municipal aid and line-item veto authority over non-curriculum education expenditures, to a new additional revenue option for towns from a portion of the sales tax and changes in collective bargaining, these budget proposals would both protect municipal funding from the state and provide real avenues to cost containment for local governments," he said.

Unlike the fractious House Democratic caucus, which is riven with ideological divisions between liberals and moderates, House Republicans have been united on budgetary matters. But Aresimowicz expressed confidence that his proposal would pass the House, where Democrats hold a slender advantage. "It will go up on the board on July 18, and we're comfortable we'll pass it," he said. "We hope it's a bipartisan, bi-chamber and executive buy-in budget."

Aresimowicz said the biggest difference between the budget proposals put forth by Republicans and Democrats is the amount of money that is expected to be saved through labor concessions. Republicans anticipate much more significant savings than the amount negotiated by Malloy and the unions.

The House Democratic plan also includes a Republican priority: The Passport to Parks program, which would raise passenger vehicle registration fees to fund state parks, which have been hit hard by budget cuts in recent years. Under the program, an extra fee would be tacked on to vehicles registered in Connecticut. In exchange, the owners of those vehicles would be allowed to park for free at all state parks. Out-of-state visitors would still have to pay a parking fees at parks that charge them.

Aresimowicz said he would have been interested in potentially passing a mini-budget that would lay out a spending plan through the first quarter of the year, but "not the version of the mini-budget Malloy gave us."

He said he would favor "a pared-down" version that has not yet been created. But Malloy has said that the legislature and the executive branch are running out of time to negotiate a new version of the mini-budget.

"That's the problem with dropping plans and not having negotiations or discussions and saying, 'Here, do this,'" Aresimowicz said. "We're a deliberative body. We're an equal branch of government. As much as I respect him and his process, he should respect ours and our process also."

Malloy's chief spokeswoman, Kelly Donnelly, responded that the governor wants legislators to vote on a budget.

"We're not interested in process. We're interested in action and outcomes," she said. "The state is watching -- it's time for a vote."

___

(c)2017 The Hartford Courant (Hartford, Conn.)

Visit The Hartford Courant (Hartford, Conn.) at www.courant.com

Distributed by Tribune Content Agency, LLC.