Most of the cuts come in the areas of social services and higher education.
Governor Dannel Malloy has unveiled his biennial budget, a document aimed at closing yawning gaps projected in state finances in the next two fiscal years.
The governor wants to achieve this with a package of spending cuts and a reform of tax codes that will net the state government more revenue. “The budget I present to you is filled with tough choices,” the governor told the legislature. “All told, my proposal contains more than $590 million in cuts to the current services budget.”
Most of those cuts come in the areas of social services and higher education. While there will be no layoffs of state employees, the administration will implement what it termed an “aggressive” hiring freeze, aiming to shrink the workforce by attrition by several hundred positions over two years.
Proposed state spending rises in this budget by just over three percent each year, but a large share of that increase will be swallowed up by mandated hikes in pension contributions and debt service.
Malloy also touted his plan to reduce the sales tax, framing it as a tax break for the middle class. “They’ve pitched in and shared the sacrifice,” said the governor. “Let’s give them something back.” Under this plan, the sales tax will go from the current 6.35 percent to 6.2 in November, and be reduced under 6 percent in 2017. But the budget also extends the sales tax on clothing items under $50, an exemption that was due to be restored this July. The net effect is that sales tax receipts will actually increase next year by $70 million.
Businesses face good and bad news. Malloy wants an end to the business entity tax, but the budget leaves in place the 20 percent surcharge on corporation tax.
The budget also delays a planned expansion in the Earned Income Tax Credit. Scheduled to rise to 30 percent next year, it will remain at its current level.
Businesses, too, face good and bad news. Malloy wants an end to the business entity tax, the $250 fee that businesses must pay to register with the state. But the budget also leaves in place the 20 percent surcharge on corporation tax. It also tightens the rules for corporations who want to book losses against their tax bills. Currently businesses can carry forward losses into future years, and offset 100 percent of the tax bills. The carry forward still applies, but offsets will be capped at 50 percent.
If it’s approved by the legislature, this plan would change the way the state calculates the tax on hospitals, resulting in a $240 million increase.
Overall, the state is projected to increase its tax receipts by $830 million over this two year budget.
Malloy spoke about his plans for what he termed a “second chance society,” reducing the prison population and expanding opportunities for ex-offenders. He said he will close one prison in the state, although he didn’t identify which facilities are being considered. “Together we can give non-violent offenders a second chance to be productive members of our community and our economy,” he said, outlining plans to eliminate mandatory minimum sentences, and reducing drug possession to a misdemeanor.
