La­mont of­fers first hints at state bud­get

The News-Times - - FRONT PAGE - By Keith M. Pha­neuf

Gov. Ned La­mont’s first bud­get pro­posal isn’t due to law­mak­ers un­til mid-Fe­bru­ary. But that didn’t stop the new gov­er­nor from drop­ping a few hints about his fis­cal plans Wed­nes­day when he ad­dressed law­mak­ers for the first time.

Though full de­tails won’t be forth­com­ing for weeks, La­mont in­di­cated he would seek big sav­ings from union­ized state em­ploy­ees and mu­nic­i­pal­i­ties.

La­mont promised a fis­cal blue­print to keep state fi­nances in the black for years to come — avert­ing the fu­ture deficit fore­casts that plagued his pre­de­ces­sor, Gov. Dan­nel P. Mal­loy. But given his spend­ing pri­or­i­ties and re­peated pledges to pre­serve the rainy day fund, La­mont likely will need to iden­tify sig­nif­i­cant new rev­enue.

“We can­not af­ford to let the next four years be de­fined by a fis­cal cri­sis,” La­mont told law­mak­ers Wed­nes­day dur­ing his first State of the State Ad­dress. “The fate of our great state is on a knife’s edge. If we choose in­ac­tion and more of the same — we fail.”

Unions fac­ing an­other big ask

La­mont’s ini­tial chal­lenge is to rec­om­mend a bi­en­nial bud­get for the

2019-20 and 2020-21 fis­cal years. The Leg­is­la­ture’s non­par­ti­san Of­fice of Fis­cal Anal­y­sis says state fi­nances, un­less ad­justed, would run $4 bil­lion in deficit over the two years com­bined.

Equally im­por­tant, this pro­jec­tion comes de­spite ma­jor state tax hikes in

2011 and 2015. Con­ces­sions from state em­ployee unions have been a ma­jor bud­get­bal­anc­ing tool in re­cent years.

In 2011, Mal­loy’s first bud­get pro­posal rec­om­mended la­bor grant con­ces­sions worth an un­prece­dented

$1 bil­lion per year. Non­par­ti­san an­a­lysts con­cluded the con­ces­sions plan that was even­tu­ally rat­i­fied — in­clud­ing a wage freeze and new lim­its on health care and re­tire­ment ben­e­fits — was worth $648 mil­lion per year in bud­getary sav­ings.

Sen­si­tive to that, La­mont said dur­ing the cam­paign he would call unions to the bar­gain­ing ta­ble to seek “reforms,” or “win-win” changes that would save money yet be ap­peal­ing to la­bor and man­age­ment.

Union lead­ers, who want a re­prieve from con­ces­sions re­quests, are skep­ti­cal their def­i­ni­tion of a “win­win” sce­nario that matches La­mont’s.

La­bor of­fi­cials fre­quently note the bud­get cri­sis stems largely from leg­is­la­tors and gov­er­nors who served be­tween 1939 and 2010. State of­fi­cials rou­tinely failed for decades to save for promised pen­sion and other re­tire­ment ben­e­fits, for­feit­ing bil­lions of dol­lars in po­ten­tial in­vest­ment earn­ings in the process and leav­ing cur­rent tax­pay­ers to make up the dif­fer­ence.

By pledg­ing late in last fall’s cam­paign not to raise in­come tax rates, La­mont has ruled out la­bor’s pre­ferred solution: higher taxes on the wealthy.

On Wed­nes­day, La­mont made it clear no one is ex­empt from be­ing asked to sac­ri­fice again.

“I refuse to in­vest any time in the blame game of who’s re­spon­si­ble for this cri­sis,” the gov­er­nor said. “It’s real, it’s here and it’s time to con­front it head on. And, please don’t tell me you’ve done your share and it’s some­body else’s turn. It’s all of our turns.”

The pres­i­dent of the Con­necti­cut AFL-CIO, Sal­va­tore Lu­ciano, said union­ized state work­ers car­ried a larger share of bal­anc­ing Mal­loy’s first bud­get — dubbed “Shared Sac­ri­fice” — than any other group in the state. “‘Shared Sac­ri­fice’ ended up be­ing state em­ploy­ees,” he said.

Lu­ciano added, though, that he as­sumes La­mont’s call for sac­ri­fice Wed­nes­day ap­plies to more than just la­bor.

“When he says ev­ery­body, he means ev­ery­body,” he said.

A push to­ward re­gion­al­iza­tion — and cuts to lo­cal aid?

Though La­mont never of­fered mu­nic­i­pal aid ab­so­lute im­mu­nity from bud­get cuts, he stressed repeatedly on the cam­paign trail he would try to shield lo­cal gov­ern­ments and prop­erty tax­pay­ers — es­pe­cially those in poor cities.

But if La­mont hopes to close the deficit and in­vest more heav­ily — as he men­tioned Wed­nes­day — in job train­ing, pub­lic col­leges and uni­ver­si­ties, and ed­u­ca­tion in gen­eral — lo­cal aid may have to be on the chop­ping block.

How might the new gov­er­nor re­duce the $3.2 bil­lion in mu­nic­i­pal grants Con­necti­cut pro­vides and still shield lo­cal prop­erty tax­pay­ers?

Law­mak­ers have talked fre­quently about re­gion­al­iza­tion over the past decade, but found lit­tle agree­ment on how to en­sure mu­nic­i­pal­i­ties share ser­vices.

La­mont said Con­necti­cut has to speed up this process.

“So many ser­vices and back-of­fice func­tions can be de­liv­ered at a much lower cost and much more ef­fi­ciently if they are op­er­ated on a shared or re­gional ba­sis,” he said. “We need to break down si­los and en­gage in the bulk pur­chas­ing of ev­ery­thing from health care to tech­nol­ogy. The tax­pay­ers of Con­necti­cut can no longer af­ford to sub­si­dize in­ef­fi­ciency.”

Mu­nic­i­pal ad­vo­cates have grown in­creas­ingly frus­trated at talk of re­gion­al­iza­tion, ar­gu­ing it has be­come an ex­cuse to cut lo­cal aid in ex­change for half-baked, po­lit­i­cally safe con­sol­i­da­tion ideas that save lit­tle or no money.

“The state has done such a poor job with data col­lec­tion,” said Joe DeLong, ex­ec­u­tive di­rec­tor of the Con­necti­cut Con­fer­ence of Mu­nic­i­pal­i­ties. “Let’s work with real num­bers, not opin­ions.”

CCM un­veiled a sweep­ing plan to bol­ster com­mu­ni­ties in 2017. That re­port, crafted by a bi­par­ti­san panel of mu­nic­i­pal lead­ers, in­cluded a pack­age of col­lec­tive bar­gain­ing changes to en­cour­age shared ser­vices.

New ser­vices pro­vided re­gion­ally would be ex­empt from col­lec­tive bar­gain­ing.

Merg­ers of ex­ist­ing lo­cal pro­grams that em­ploy union­ized staff would go through a new col­lec­tive bar­gain­ing ef­fort, rather than be­ing tied to con­di­tions set in pre­vi­ous union con­tracts.

Law­mak­ers balked at these pro­pos­als and have been re­luc­tant to force merg­ers in­volv­ing po­lit­i­cally sen­si­tive ser­vices like schools and po­lice pro­tec­tion.

Can La­mont end cy­cle of deficits with­out rev­enue?

Also Wed­nes­day, La­mont did more than pledge to pro­duce a bal­anced bud­get.

He said he would of­fer a plan that would end the trend of fu­ture deficit fore­casts.

“I will present to you a bud­get which is in bal­ance not just for a year, but for the fore­see­able fu­ture,” he said. “... I want to be clear — no more funny math or bud­getary games­man­ship. I come from the world of small busi­ness where the num­bers have to add up at the end of the month or the lights go out.”

Through­out much of Mal­loy’s ad­min­is­tra­tion, even when the cur­rent bud­get was in bal­ance, an­a­lysts warned the plan wasn’t sus­tain­able — and that within as lit­tle as one year the state would again be spend­ing more than it was tak­ing in.

In fact, even if La­mont makes ad­just­ments to avoid the $1.7 bil­lion po­ten­tial deficit next fis­cal year and the $2.3 bil­lion gap in 2020-21, the bud­get could spring more leaks after tha t — even if Con­necti­cut and the na­tion don’t slip into re­ces­sion.

Those surging pen­sion and other debt costs are the chief fac­tor, and an­a­lysts already are pro­ject­ing hun­dreds of mil­lions of dol­lars in new po­ten­tial red ink in 2022 and 2023.

Fur­ther com­pound­ing mat­ters, La­mont has an ex­pen­sive cam­paign prom­ise to keep: a mid­dle-class in­come tax cut.

The new gov­er­nor promised to dra­mat­i­cally ex­pand the state in­come tax credit that re­im­burses mid­dlein­come house­holds for a por­tion of the lo­cal prop­erty tax bills they face. La­mont pledged to phase in this tax break dur­ing his second and third years in of­fice, and his cam­paign es­ti­mated the full cost would reach

$400 mil­lion per year.

How does La­mont pro­vide that tax cut, in­vest in ed­u­ca­tion and job train­ing, close an an­nual deficit of roughly

$2 bil­lion — and keep his cam­paign pledge not to raise in­come and sales tax rates?

“Gov. La­mont has promised the state he will put forth an hon­estly bal­anced bud­get that will fa­cil­i­tate growth, put the state’s fi­nances on a re­li­able and sta­ble tra­jec­tory, and be mind­ful of the fu­ture while han­dling the struggles of the present,” Chris McClure, spokesman for the gov­er­nor’s bud­get of­fice, said Thurs­day.

“... By work­ing with a broad coali­tion of ex­perts and stake­hold­ers across party lines, the gov­er­nor and his staff will de­velop a bud­get that moves Con­necti­cut for­ward through the next fis­cal year and with an eye on the next decade.”

The rev­enue-rais­ers La­mont men­tioned on the cam­paign trail — a fee on sports bet­ting, le­gal­iz­ing and tax­ing recre­ational mar­i­juana use, and tolls on larger trucks — would be a mod­est help to­ward a bal­anced bud­get.

Any toll re­ceipts would be ap­plied to the Spe­cial Trans­porta­tion Fund, which also needs cash. But this is out­side of the Gen­eral Fund and would play no role in re­duc­ing that deficit.

Very preliminary es­ti­mates for rev­enues from sports bet­ting have been around $40 mil­lion per year, while those for mar­i­juana have ranged from $30 mil­lion to $166 mil­lion. In the con­text of an an­nual short­fall of about $2 bil­lion, these are mi­nor fixes.

La­mont has ex­pressed a will­ing­ness to con­sider broad­en­ing the range of goods and ser­vices sub­ject to the sales tax.

The state Com­mis­sion on Fis­cal Sta­bil­ity and Eco­nomic Com­pet­i­tive­ness re­ported last year that roughly

$600 mil­lion in new an­nual sales tax re­ceipts might be raised by re­mov­ing ex­emp­tions.

Arnold Gold / Hearst Con­necti­cut Me­dia

Gov. Ned La­mont of­fered clues to his first bud­get Wed­nes­day when he de­liv­ered the State of the State ad­dress.

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