Malloy Releases Budget Details

Feb. 05--Gov. Dannel P. Malloy outlined a plan Monday that seeks to address Connecticut's long term budget deficits without an across the board income tax hike.

However his proposals to increase taxes on everything from cigarettes to real estate conveyances to gasoline will cost many Connecticut residents more money. He is also calling for the establishment of highway tolls, a new 25-cent-per-bottle deposit on wine and hard liquor and the elimination tax credits and exemptions, including the popular $200 property tax credit for homeowners.

One key part of the budget proposal is a plan that the Democratic governor says will help state taxpayers navigate changes brought on by the new federal tax law signed by President Trump.

Malloy is seeking legislation that would allow cities and towns to create charitable foundations to fund local services. This is in response to the tax law that largely eliminated federal deductions for state and local taxes. Under Malloy's plan, Connecticut taxpayers could receive a credit in return for their contributions.

Malloy is once again proposing cutting education grants to Connecticut's 33 wealthy communities, an approach he has tried in the past to get through the legislature but failed. His budget would cut municipal aid overall and would also cut $7 million from the state's Priority School District program, which serves the state's neediest communities. And his plan would cut millions from the amount of money that towns receive in lieu of taxes for hosting colleges, state buildings and other non-taxable properties.

But as significant as what the budget proposal contains are the items he left out. Malloy suggested lawmakers might consider other measures to bolster the state's long term fiscal health, including raising the sales and use tax and legalizing and taxing marijuana. Malloy has been a steadfast opponent of legalizing marijuana throughout his time in office, so his suggestion that lawmakers may want to consider doing so is significant.

Malloy, in the final year of his final term in office, released the details two days before the legislature is set to convene for the 2018 session.

"The budget we are proposing today is about the future -- specifically Connecticut's long-term fiscal stability," Malloy told reporters. "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. 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."

On the spending side of the ledger, Malloy is proposing $100 million to renovate Hartford'a aging XL Center.

Malloy's proposal to increase the cigarette tax to $4.60 per pack would generate an additional $20 million. He is also calling for a corporate tax surcharge of 8 percent to be imposed in the 2019 calendar year.

Malloy has already proposed electronic highway tolls for the first time in order to pay for transportation improvements. He has also endorsed increasing the state's gasoline tax by seven cents over four years, hiking the current 25-cents-per-gallon rate.

Those ideas have already run into a buzz saw of criticism from Republicans, who say that tolls are simply another tax. House Republican leader Themis Klarides of Derby says the state could have as many as 78 tolling locations along Interstates 95 and 84, along with other highways. The final sites have not been set, but officials say they need extra locations because motorists will simply jump on and off the highway at strategic points to avoid the toll.

A lifelong Stamford resident, Malloy told reporters recently that he would sometimes drive along Interstate 95 for only one exit in order to avoid traffic jams in downtown Stamford. Since Route 1, known as the Post Road in many areas, closely parallels I-95 in many spots in lower Fairfield County, it is easy for motorists to jump back and forth from the highway to the local roads -- thus easily avoiding the tolls.

Despite pressure from some Democrats who want to legalize recreational marijuana in order to obtain tax revenue, Malloy will not propose that move, Democratic insiders said. He also will not propose sports betting to close the deficit, officials said. The U.S. Supreme Court is expected to make a key ruling this spring that could pave the way for sports betting.

Malloy's most immediate task for lawmakers is to close the budget gap of nearly $245 million for the current fiscal year and then make adjustments to the second year of the two-year budget.

Despite the explosion in the stock market since President Donald Trump's election, some of the money has not fallen into state coffers because some investors had been holding onto their stocks and not yet cashing in their gains, officials said. Some of that changed Friday as the Dow Jones Industrial Average dropped 666 points, or 2.5 percent, in the worst stock day since Trump was elected.

The stock market volatility continued Monday, and the selling could lead to increased capital gains for the state coffers.

Senate President Pro Tem Martin Looney and other lawmakers say they will have a much clearer picture of the state's finances after millions are collected by the traditional April 15 tax filing deadline, which has been pushed to April 17 this year due to holidays.

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