Governor Dannel Malloy is proposing additional major cuts to state spending in Connecticut as he addresses a widening budget deficit projected for next year. The biggest losers this time around appear to be municipalities: state aid to towns and cities is cut by $600 million.
Income tax and sales tax rates will remain the same, but the sales tax would be levied on over-the-counter drugs for the first time. The proposal also includes an increase in the real estate conveyance tax on high-end homes over $800,000.
The cuts and takes hikes are necessary because the state's income tax isn't yielding the revenue that Malloy's initial budget proposal relied on.
“Over the last several years we have asked state agencies to do more with less,” said the governor at a press conference announcing the new plan. “They have delivered on that task and they will continue to realize efficiencies, but we must acknowledge that the state agencies will need to start doing less with less.”
More than 30 municipalities would completely lose state aid for their school systems. But Hartford, which is on the verge of bankruptcy, would receive a $50 million increase in funding.
"If you look at the data," said Malloy, "our wealthiest communities have a per-capital tax base of between $600,00 and almost $800,000. And our poorest communities have per capital tax bases of $45,000. There's a world of difference."
Malloy said he has prioritized stabilizing the special transportation fund, as well as paying towards the state’s long-term retirement obligations.
Reactions to the plan have been mixed. "While I still have serious concerns about elements of his proposal, including unfair burdens being placed upon municipalities," said Senate Republican leader Len Fasano, "I also appreciate the governor being open minded and incorporating ideas from others, such as efforts by Republicans to stabilize the state’s Special Transportation Fund."
He said he and his caucus plan to release their budget revisions before meeting Wednesday with the governor.
Meanwhile, the AFL-CIO said the state is failing to invest in growth. In a statement, President Lori Pelletier said, “Governor Malloy has doubled down on an austerity budget plan that deepens cuts to programs for the state’s most vulnerable, reduces transparency by eliminating the State Contracting Standards Board, and potentially risks public safety with the elimination of funding for fire training schools and deferring a new class of state troopers. On top of this, the state is laying off frontline public service workers despite the workforce already being cut to the bone."
She said the state should be reviewing its tax expenditures on big business, instead of eliminating the property tax credit.