Malloy’s final budget includes tax increases, cuts, tolls

Hartford — Highway tolls, spending cuts and a range of tax changes, including a higher levy on cigarettes and a 25-cent-per-bottle deposit on wine and liquor, are part of Gov. Dannel P. Malloy’s final state budget proposal.

Malloy, a Democrat, unveiled the details of the $20.73 billion plan on Monday, two days before he will address the General Assembly in his last State of the State address. He is not seeking a third term in office.

He said fiscal integrity remains the “guiding principle” in the adjustments his administration is proposing to square the budget, which begins July 1. It’s the second year of the two-year bipartisan budget agreement lawmakers approved in October, which he estimates is now out of balance by $266 million.

“Our main objective in this proposal is to provide legislators with workable solutions that will bring the budget into balance and keep it there,” Malloy said.

Malloy said his plan reduces future projected state budget deficits by half, but red ink will still remain. Deficits of $1.3 billion, $1.4 billion and nearly $1.5 billion would be expected in fiscal years 2020, 2021 and 2022, respectively.

Early reviews of the governor’s proposed budget adjustments were mixed.

“The reality is that, starting Wednesday, the legislature takes over, and we all know some of those ideas will likely survive and many won’t,” said House Speaker Joe Aresimowicz, D-Berlin.

This year’s legislative session ends on May 9.

Republican Senate Leader Len Fasano, of North Haven, had sharp criticism for the governor’s proposal, which he said will move Connecticut backward after the steps Democratic and Republican lawmakers took in October to shed its reputation for being a high-tax state.

“What the governor released today is nothing more than a continuation of his legacy of tax increases, economic decline and penalties on the most vulnerable,” Fasano said.

Malloy’s budget proposal includes the following tax changes:

While the plan doesn’t increase the state’s income tax or sales tax, it does repeal the sales tax exemption for nonprescription drugs. It also eliminates the $200 property tax credit against the personal income tax. It increases the cigarette tax from $4.35 per pack to $4.60 per pack.

The plan includes possible legislation that would cushion the impact of the federal tax bill’s elimination of state and local tax deductions. For example, cities and towns would be allowed to set up charitable organizations to which taxpayers could donate their property taxes to obtain the federal tax deduction. An estimated 181,000 Connecticut taxpayers are expected to be affected by the federal changes.

The proposal would increase the state’s gasoline tax from 25 cents per gallon to 32 cents per gallon over four years, would impose a $3-pertire fee for new tires in fiscal year 2019 and calls for statewide electronic tolling by fiscal year 2023 to help shore up the state’s transportation fund and cover infrastructure fixes.

Malloy is suggesting Connecticut become the first state in the region to impose a 25-cent deposit on wine and liquor bottles, a move he said could generate $13 million. Connecticut’s so-called Bottle Bill currently applies to beer, carbonated soft drinks and noncarbonated beverages, including water.

The budget adjustments also include the following spending reductions:

Thirty-three of Connecticut’s wealthiest communities would no longer receive various state grants, including for local education, under Malloy’s plan. The move would save about $14 million. The communities would still be eligible for state aid to pay for school construction and local road repairs. Expected growth in local aid to municipalities also would be reduced.

Malloy’s plan includes $11.4 million in savings from the anticipated closure of the Connecticut Juvenile Training School in Middletown. Juvenile justice staffing also would be reduced, saving about $1.2 million.