Hartford Report / State Rep. John Hetherington
Looking at the budget
Published 6:35 pm, Wednesday, February 23, 2011
There are some basics that may be helpful. Connecticut operates on a two-year budget cycle. A budget for the biennium is adopted by the Legislature in the odd year and reviewed in the following even year. We are now in the process of crafting a budget for fiscal years 2012 and 2013. Our fiscal year runs July 1 to June 30.
Connecticut Gov. Dannel Malloy spoke on Feb. 16, setting forth his vision for the way our state is to balance its needs and resources over the next two years. But that is just the opening volley. The governor's budget does not now proceed directly to an up or down vote in the Legislature. The Appropriations and Finance committees will shape the actual proposal that goes to the House and Senate. Next spring the governor will receive a budget to accept or veto that he may not necessarily recognize.
The governor gets high marks for proposing a no-gimmicks budget. There is acknowledgment of billions in deficits and debt and he offers no new borrowing to cover current expenses. There are no stealth taxes. All of the taxes are right there -- big, bold and ugly.
That said, there is an overriding puzzlement with Governor Malloy's budget. With all of the talk of fiscal crisis and the need for shared sacrifice, we appear to spend $900 million more over the next two years. There is also a heavy reliance on tax increases of $1.8 billion in fiscal 2012 and an additional $1.6 billion in fiscal 2013. These increases follow a $1.5 billion tax hike over fiscal 2010 and 2011.
The major sources of increased revenue lay in the income and sales taxes. Made much more progressive, our income tax rate will run from 3 percent at the low end to 6.7 percent at incomes more than $1 million. The number of tax brackets is increased three to eight, with the middle class paying a hefty share. The higher rates are retroactive to Jan. 1; so start saving. The sales tax rate is increased from 6 percent to 6.25 percent, with many exemptions eliminated. The most significant exemption to go away covers clothing and footwear costing less than $50. Of particular interest in lower Fairfield County is the lowering of the estate tax threshold from $3.5 million to $2 million, with no mention of whether or not the "cliff" would return.
But is the pain shared? The governor assumes concessions from state employees amounting to $1 billion in each of the next two years. The key is "assumes." Initially at least the reaction from organized labor seems less than enthusiastic. So we have one area of sacrifice that can be imposed unilaterally by the government through taxes, and the other that must be obtained through voluntary givebacks by the unions. How do we think that will come out?
The governor initiates some consolidation of state agencies, but it looks more like shuffle than savings. Out of a total of 45,000 full-time employees, the net reduction of the workforce is estimated at only 150 people, or 0.3 percent.
Gov. Malloy deserves credit for candor in laying out his budget proposal. But his tone of urgency in the control of spending and his emphasis on the sharing of sacrifice seem not to be born out in the substance of his plan.