House GOP Issue Revised “No-Tax Increase” Budget

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HARTFORD – House Republicans today issued their revised no-tax increase budget for 2018-19 that eliminates the projected $5 billion budget deficit, increases school funding for all towns, reduces the corporate surcharge and mitigates municipal aid losses by reallocating funds.

“This is probably the most challenging budget to put together because revenue projections collapsed in recent weeks. Our goal was to come up with a plan that does not increase any taxes and mitigates the revenue losses to towns and cities and we did just that,’’ House Republican Leader Themis Klarides said.

Every town will see an increase in school funding over current levels. House Republicans relied on significant state employee union concessions and reduced state spending to balance the budget. They also included a wage freeze for state employees, but no layoffs.

Now the hard part comes as Republicans join Democrats and Gov. Malloy at the negotiating table to come up with a final budget plan that can pass both the House and Senate, Klarides said.

“We are hopeful of meeting the June 7 deadline for the end of the legislative session,“ Klarides said.

The Governor’s revised budget proposal includes hundreds of millions in additional cuts in local aid that Republicans rejected. The House GOP also turned down a proposal to require towns and cities to pay $400 million in teacher pensions.

Republicans did accept Malloy’s plan to eliminate GAAP funding to save $57 million a year and eliminated the Municipal Revenue Sharing Account, MRSA, and redirected the money to help balance the budget.

“This budget makes it clear that House Republicans do not support tax increases that have not worked in the past,’’ Klarides said. “That failed policy has cost Connecticut jobs and has sent people and employers to the exits.’’

DOCUMENTATION:
Policy Changes
Revenue
Budget Accounts
Municipal Aid
Concessions

April 27th Legislative Republican Proposal
(January Consensus Revenue)
May 16th House Republican Proposal
(April Consensus Revenue)
Increase Care4Kids funding to restore eligibility. Reduce Care4Kids funding equal to amount in governor’s budget.
Increase Magnet School Funding by $20 million a year. Reduce Magnet School funding, including policies to 1) eliminate stipend for parents who drive kids to school and 2) require means testing for pre-k children.
Fund Connecticut Homecare Program for the ElderlyLimit funding for Category 2 Home Care at FY17 levels.
Maintain Reserve for Salary Adjustment (RSA) account and achieve salary freeze and union concessions as part of $700 million lapse in FY 17 and $867 million lapse in FY 19Reduce salary increase funding in the RSA account to achieve wage freeze. In addition, the proposal would achieve approximately $725 million in concessions each year.
Does not recognize $89 million in pension savings related to wage freeze. Reduces employee retirement account by $89 million to account for savings related wage freeze.
Minor reduction to School Scholarship programBegin phase-out of Scholarship program - no new scholarship recipients. Current recipients would continue to receive scholarship if qualified.
Include $2 billion cap on bond issuance.Reduce bond issuance cap to $1.3 billion - same level as FY 13.
Maintain CHRO as separate agency.Consolidate CHRO with the Office of Governmental Accountability and reduce CHRO funding by two-thirds
Maintain Supplemental PILOT portion of MRSA program.Eliminate Supplemental PILOT portion of MRSA program- MRSA is eliminated entirely.
Hard Hiring FreezeReduce state workforce through attrition by 2% starting in the second year of the biennial budget. Begin attrition savings in year two at $42.2 million.
Retain municipal aid for Elderly Circuit Breaker program.Reduce municipal aid for Elderly Circuit Breaker program.
Reduce EITC to 25%Eliminate "refundable" nature of EITC. Credit can be taken only to reduce tax liability to zero.
7-year phase-out of income tax on pensions.Remove the phase-out of income tax on pensions.
Reduce Property Tax Credit by to half and limit credit to elderly and adults with dependents.Retain Property Tax Credit at levels under current law with a maximum $200 credit.
Allow Corporate Surcharge to sunset this year. Allow Corporate Surcharge to sunset this year.
Does not apply cigarette tax to e-cigarettes.Does not apply cigarette tax to e-cigarettes.
Recognize $14 million in additional revenue for Volkswagen SettlementDeposit one-shot revenues in to the Rainy Day Fund; such as the Volkswagen settlement.
Accept $20 million in second-year fee increases from governor’s proposal.Eliminate $20 million in second-year fee increases from governor’s proposal.
Did not change GAAP funding.Accept governor’s proposal to NOT provide GAAP incremental funding- saves $57.5 million a year.
Proposed new ECS formula. Municipal Aid levels change for all towns. Retains current ECS distribution and adds $20 million. Creates $90 million hold-harmless grant to ensure no municipality loses aid compared to the current fiscal year.