Malloy provides path to get budget passed

I f this doesn’t do it, Connecticut’s budgetary crisis could quickly escalate from Cat. 3 to Cat. 5.

Gov. Dannel P. Malloy on Friday eased his calls for deeps cuts in municipal aid and backed off on demands that municipalities share a big part of the burden in addressing the state’s grossly underfunded teacher pension system.

These moves should win over the votes of Democratic legislators who had balked at the governor’s call for deep cuts in local aid.

At the same time, Malloy continued to push for reforms that would help municipalities manage their money. Reforms would include relief from state mandates; revisions in binding arbitration rules to control the growth of labor costs; and modifying prevailing wage requirements to lower the cost of construction projects. That agenda could appease fiscally cognizant Democratic legislators who will want to point out they took steps to control government spending, even as they OK various tax increases to balance the budget.

Malloy’s fellow Democrats in the legislature have to find a way to a compromise with the governor, whose signature is necessary to make any spending plan law.

Republican support for any budget plan seems unlikely. Given the $3.5 billion gap the legislature must close over the next two years, some increases in taxes are inevitable. Republicans leaders last week made it clear they won’t support any.

Democrats have been in control of Connecticut government since Malloy’s first election in 2010. They’ve rejected Republican budgetary policy proposals. With an election in 2018, Republicans see the potential to gain control of the House and or Senate and place a Republican in the governor’s office. Why would Republicans at this point share the blame for what promises to be an unpopular budget by offering up votes to get it passed?

That means Democrats have to figure this out despite a narrow majority in the House and an 18-18 split in the Senate, where their ability to pass anything rests with Lt. Gov. Nancy Wyman breaking a tie vote.

In trying to line up those Democratic votes, Malloy is no longer calling for an immediate and drastic redistribution of state education aid from better-off communities to poorer ones. While his latest budget proposal still cuts overall state education aid by $113 million, it would only transfer $11 million this fiscal year to low-achieving districts. It’s a pragmatic move to gather up votes. The governor also abandons his plan that called for municipalities to collectively begin contributing $400 million annually toward funding teacher pensions, a burden that now rests exclusively with the state. House and Senate members have said their local districts cannot handle that requirement without cuts in education and services, along with higher property taxes.

Yet Malloy is right that it makes sense for municipalities to share in the cost of providing pensions for the teachers their school systems employ. For years prior governors and legislatures failed to set aside the funds to meet the pension obligations. As a result, Connecticut is now contributing $1 billion, 5 percent of its budget, to catch up. That number will only grow without change.

Give the governor credit for addressing the matter. He is not seeking re-election in 2018 and could have reached a budget deal by leaving the problem to successors.

His new pension proposal would require municipalities to set aside funds to cover the future pensions of present-day teachers. He is asking $92 million from municipalities in the first year, $190 million the next. The contribution would remain relatively stable thereafter.

In easing the burden placed on towns and cities, Malloy had to find more revenue and proposes a range of tax hikes, including pushing the sales tax from 6.35 percent to 6.5 percent. His budget would again raise the cigarette tax, expand the beverage products requiring deposits, and hike the real estate conveyance tax.

Most problematic, Malloy would again increase the tax on hospitals; a move the administration claims would attract more federal Medicaid revenue. The legislature needs to question that idea. Hospitals have seen such tax increases before under Malloy, only to see promised reimbursements pulled away.

Connecticut has struggled without a budget for 10 weeks. As noted at the start of this editorial, the damage from the resulting fiscal storm could soon grow fierce. At the end of September and early October local state aid, particularly for education, begins to flow to towns and cities. Malloy has warned of a 28 percent reduction without a budget, devastating local budgets.

Malloy has made a move. Lawmakers need to respond and pass a budget.