The state's still-precarious fiscal landscape may curb any big plans for the short, 13-week session of the General Assembly that started Wednesday, when Gov. Dannel P. Malloy presented his budget adjustments and initiatives.

His State of the State address mentioned last year's $3.5 billion deficit and his commitment, required under state law, to keep the two-year, $40 billion operating budget in balance.

A shortfall in income tax revenue has already resulted in Malloy's recent order to cut $79 million from the current budget.

But another $74 million deficit is projected in the spending package that runs through the end of June.

So the financial picture doesn't give much wiggle room to the Democratic governor and the Democratic majorities in the House and Senate, pending the flow of fresh tax money coming after April 15.

That need for revenue is one of the reasons why Malloy has announced support for Sunday retails sales of alcohol, as well as expanded late-night hours for bars, to bring in a relatively small $8 million or more in new revenue.

"Obviously, this session is about some budget adjustments and education," Malloy said.

"We'll speak to continued fiscal discipline and address the yawning pension gap that has been allowed to grow. We'll also be modernizing and favoring the consumer on alcohol sales, but compared to the budget and pensions, it's not nearly as big as important."

Joseph F. Brennan, senior vice president of public policy for the Connecticut Business & Industry Association, is prepared for the budget and schools to be the central focus this year.

"We have concerns over keeping the budget in balance and we're talking about the need to reduce operating expenses," he said. "No additional taxes will be a top issue, along with education reform."

Focus on education

Malloy will offer a variety of new programs, which he has unveiled or hinted at in recent weeks, including enhanced preschool programming and a renewed focus on preparing vocational-technical high school students for the high-tech jobs of the 21st century.

Indeed, since last October's special session on jobs, Malloy, now in the second year of his four-year term, has said the 2012 session would be about education.

He has promised to retain current levels of state funding for local public schools, a commitment that might not be enough for the cash-strapped city schools that want more education money.

While Malloy is not up for election this fall, the 151-member House and the 36 men and women of the Senate have a campaign season ahead.

Democrats, who last year approved the largest tax increase in state history, want to retain their 99-52 and 22-14 majorities in the House and Senate, respectively.

Republicans, striving for relevancy and respect from the majority, will surely be pointing out those tax hikes to the electorate as the spring leads into the campaign toward Election Day Nov. 6.

Legislative Democrats recently renewed their vows to foster new jobs.

The State Bond Commission last week allocated $10 million for programs targeting subsidies for small business and manufacturers to train and hire new employees.

Senate Majority Leader Martin M. Looney, D-New Haven, said last week that he would like to expand the Subsidized Employment and Training Program from firms of 50 or less, up to companies of 100 employees.

Looney said educational reforms need to emphasize bridging the achievement gap, where urban schools, including New Haven, Bridgeport and Hartford, lag far behind schools in their nearby suburbs.

"There is no political consensus to take money from District X and give it to District Y," Looney said.

"Many districts are performing just fine and there's no need to be radical or to reinvest, but there should be focus on the need that's greatest."

Jim Finley, executive director of the Connecticut Conference of Municipalities, said leaders of towns and cities have drawn some amount of confidence from Malloy's promise to at least retain current aid levels.

"We're anxious to see the details of his education reform agenda because you can't do education reform without education finance reform, and our members are too reliant on property taxes to fund K-through-12," Finley said.

"There are a variety of areas where we can combine financial sources to get a bigger bang for the buck."

Little off limits

By law, the midterm budget adjustment session limits legislation to money-related bills, but since nearly everything -- even social issues such as gambling, Sunday sales, storm-related legislation and the death penalty -- have fiscal consequences, those issues are likely to surface in one form or another.

Legislative hearings on online gambling last week indicated that Democratic leadership and the governor will not push its legalization this year.

Malloy supports a variety of ways to strengthen the state's electric infrastructure and hold utilities accountable for prolonged outages following weather events such as last year's August and October storms.

Brennan, the executive from CBIA, the state's largest business organization, said the storm-related legislation is a challenge for lawmakers and the industry.

"We have to balance more reliable ways of delivering electricity with the cost of that reliability," Brennan said.

Malloy's support of Sunday alcohol sales at package stores and supermarkets will most likely galvanize opposition from the Connecticut Package Stores Association, mostly small retailers who want to have Sundays off.

Advocates for the repeal of the death penalty will re-introduce the legislation, which, among other things, is supported as a way to save money in the decades of appeals by substituting life in prison without the possibility of release for the state's most-heinous murderers.

But with the midnight, May 9, legislative deadline on the horizon, prolonged debates on hot-button issues could be bill killers.

Gop priorities

Republican leaders said they plan an array of proposals.

"Obviously, my first priority is to continue to make Connecticut a better place in which to do business, grow jobs and attract business," said Senate Minority Leader John McKinney, R-Fairfield.

In addition to jobs-related proposals that Democrats did not adopt last year, McKinney and House Minority Leader Lawrence F. Cafero Jr., R-Norwalk, said they will push for the elimination of costly regulations.

"I think the jobs and economy are linked by making sure our budget is balanced through a downsizing of state government," McKinney said. "There are many areas where we can reduce spending. Last year the governor's budget actually raised spending over the prior year. We continue to talk about pension-benefit reforms and unfunded-liability reforms."

McKinney wants state and local officials to get training, at the expense of the Connecticut Light & Power Co. and the United Illuminating Co., in de-energizing power lines so towns can better deal with downed trees after major storms.

Cafero said in a phone interview last week that the 2012 session may be known for its "verification and modification" of the two-year budget approved last year.

"This budget isn't working," Cafero warned, noting that Moody's Investors Service recently downgraded the state's bond rating and that state Treasurer Denise Nappier plans to dip into bond monies to pay monthly bills, as the state's cash pool is down to $44 million.

Cafero believes that the state's Earned Income Tax Credit for the working poor could cost the state $50 million above this year's projected cost of $150 million.

"Even if the governor is correct and everything is fine, we have a responsibility to investigate and modify these things," Cafero said.

"I really think as much as we'd like to put the financial stuff behind us and focus on education. I think we're going to revisit the financial situation."

kdixon@ctpost.com.; 860-549-4670.