Historic Compromise Budget Deal Changes Connecticut Government

The narrowing of the Democratic stranglehold on state government following the 2016 elections has led to a compromise budget deal that fundamentally alters the way Connecticut’s government is paid for by imposing historic spending controls, something Republicans have sought for decades. If Gov. Malloy signs the budget the state’s longest fiscal impasse would end. And the looming crisis Connecticut faces would stall at the doorsteps of towns and cities, state social service agencies, our schools and hospitals. That’s a big "if" but here’s hoping the governor recognizes the disaster that awaits if this impasse continues and Connecticut continues to operate under his executive orders. The full effect of this compromise will not be felt for years. Connecticut must emerge from the brutal cycle of tax increases to cover massive deficits, inevitably followed by more deficits and tax hikes. That is why Republicans pushed as hard as we did to exact from Democrats the spending constraints. Twenty six years after voters overwhelmingly approved a constitutional spending cap, Republicans succeeded in carrying out the will of the people. But we did not stop there. Consider some of the other aspects of spending controls in the budget:

• An annual bonding cap of $1.9 billion in borrowing, a half billion less than what Connecticut put on its credit card last year;
• A revenue cap that prevents the state from spending all the money it expects to take in annually. Somehow we always seem to fall short of revenue projections;
• A volatility cap that will automatically send any access revenue to the Budget Reserve Fund.

Currently, state employee union contracts can go into effect without a vote by the legislature. In a huge concession in this negotiated budget we will now require votes by the House and Senate before a contract can become law. There are no new income or property taxes in the agreement. Despite the massive $3.5 billion deficit we faced, there are only modest reductions in municipal aid and education grants. A task force will be created to finally address the need to reconfigure our Education Cost Sharing formula that has been so mangled over the years. There is relief for towns and cities by way of binding arbitration reforms:

• Arbiters will not be allowed to consider a town’s entire fund balance in determining contracts and awards under our Ability to Pay provision
• The prevailing wage threshold for construction projects will be raised from the minimum $400,000 level to $1 million, a move that will reduce the cost of local jobs;

The number one goal of the Connecticut Education Association, the largest union representing unions, was to block the governor’s proposal to shift a huge portion of the teachers’ pension obligation to towns and cities. We banded together with Democrats to block that proposal. The teachers’ union and others wrongly labeled our proposal to increase their pension contribution one percent to boost their retirement accounts as a tax. It is not a tax but a reasonable approach to achieve some savings while enhancing the retirements of thousands of hardworking, deserving educators. We preserved funding for critical social services programs such as meal delivery for the elderly and Care4Kids. A number of other achievements that came out of the arduous, painstaking negotiations were never included in the final document. Republicans succeeded in blocking a surcharge on all homeowner policies to help pay for the notorious crumbling foundations. The ill-conceived elimination of the tax on motor vehicles, a last-minute addition to the negotiations, was scrapped. No widespread motor vehicle fees were included and a slew of proposed taxes - from hotel rooms to cell phones, secondary homes and sales - never made it through. The creation of a Transportation Finance Authority with the power to levy taxes to pay for construction projects was raised by Democrats and then dumped. The full implementation and funding of unionized personal care assistants was also rejected by Republicans. The Courant and others complained loudly about how long the negotiations took. The major reason why was the lack of options to balance the budget. When the Democrats passed the SEBAC union deal on July 31 without a single Republican vote, it secured four years of no layoffs for state workers, added 10 years to their healthcare and retirement plans and prevented any cost-saving state government reorganizations. It took nearly four months but the ramifications will be felt years into the future. - By Rep. Themis Klarides, House Republican Leader