Gov. Dannel P. Malloy called for potential tax increases and additional budget cuts Wednesday to close a projected gap of more than $200 million in the current fiscal year — showing that the state’s budget problems are not over.
The proposed cuts include reductions for school-based health clinics, welfare cash benefits, community health centers and mental health and substance abuse services. Another option includes closing the Old State House in downtown Hartford starting on Jan. 1, which would save $500,000 a year.
A menu of tax options includes increasing the state sales tax to 6.5 percent, up from the current 6.35 percent. Pushing the sales tax even higher to 6.9 percent would raise $237 million in the second year of the two-year budget.
The options also include raising the conveyance tax on real estate sales, imposing an excise tax on e-cigarettes, hiking the hotel and restaurant taxes, and restoring the sales tax on nonprescription drugs.
None of the cuts or tax hikes would take effect immediately. Instead, they must be approved by the legislature.
Although the deficit is projected at $207.8 million, Malloy offered more than $300 million in cuts and tax increases so that the legislature would have options in its deliberations.
The possibilities include hiking the cigarette tax again by 25 cents to $4.60 per pack, which would give Connecticut the highest state cigarette tax in the nation. The tax was recently increased to $4.35 per pack, which tied Connecticut with New York, in the budget that was signed by Malloy on Halloween.
Other potential increases include tripling the tax on cigars to $1.50, up from the current 50 cents. All of the proposed tax increases would take effect on March 1, 2018.
Another possibility, which many legislators have opposed in the past, is cutting municipal aid by $100 million over two years.
“I understand that these options will be almost universally objectionable, and that there is little appetite among you or your members for making such adjustments to your budget,” Malloy wrote in a letter to top lawmakers. “In fact, I agree these changes are difficult and that in better economic times, with a balanced budget, none of us would put them on the table for consideration. However, I have a clear statutory obligation to provide you with a plan to mitigate the deficit.’’
Malloy added, “Moreover, I believe we do a disservice to the public when we defer necessary steps and fail to take decisive action, ultimately making the cost to taxpayers and damage to government services even more severe.”
In a potentially significant change in state liquor policy, the plan would also allow the sale of wine in supermarkets for the first time. Also, Malloy is again calling for the end of the minimum-bottle pricing system in the state, which he says would generate $1.8 million in about 18 months.
But Stephen Downes, the president of the Connecticut Package Stores Association, said the liquor ideas would backfire.
“Proposals like the elimination of minimum-bottle pricing and allowing wine in food stores that would cost the state in excess of $15 million in lost sales tax and other revenue are impractical and lack foresight,’’ Downes said. “These are just more of the reactive proposals that continue to put the state in a deficit dive. We should not accelerate a proposal which shows a lack of understanding of a product’s market and process and costs the state revenue.’’
House Speaker Joe Aresimowicz of Berlin said that legislators will dive back into the fiscal issues after a year that has been consumed by budget talks.
“Though there seems to be no off-season, by continuing to work with all the caucuses on a bipartisan basis, I’m confident we will keep the budget balanced going forward,’’ Aresimowicz said.
House Republican Leader Themis Klarides of Derby said that “two-thirds of this plan involves raising taxes or increasing revenue, such as cigarettes, sales taxes and conveyance. Many of them sound familiar because they were included in previous Democratic proposals.’’
The governor’s plan was mandated by a state law that he must submit a deficit-mitigation package if the projected deficit exceeds 1 percent of the state’s general fund. As certified by the state comptroller on Dec. 1, the projected deficit currently exceeds that level.
While the law does not require the legislature to act immediately, state lawmakers have already been studying the budget closely.
In the state House of Representatives, lawmakers already gathered more than the necessary 76 signatures on a petition to force a special session before Christmas. Lawmakers are under increasing pressure from senior citizens and the disabled to block cuts in the Medicare Savings Program, which provides subsidies to allow recipients to pay for Medicare Part B premiums, deductibles and coinsurance.
No date has been set for a special session, but Republicans were hoping that Malloy would call them into session on Tuesday, Dec. 19.
Senior citizens are preparing a rally at the state Capitol complex on Thursday to protest about $54 million in cuts to the Medicare program, which is paid by Medicaid.
No senior citizens will lose their coverage, meaning that if they are required to go to the hospital, Medicare will still pay. Instead, they would lose the current subsidies under the Medicaid program for low-income seniors and the disabled to pay for their deductibles and other additional costs.
Since as many as 113,000 citizens could be affected by the unpopular cuts, both Democrats and Republicans are committed to restoring the money. They have already decided to cut $54 million in other accounts in order to pay for the Medicaid reductions, said Senate Republican Leader Len Fasano of North Haven.
Legislators and Malloy have been involved in a continuing dust-up over the budget, including the leaders’ decision to freeze Malloy out of the final budget talks. That breach marked only the second time in more than 35 years that a Connecticut governor was not involved in setting the final details of the budget. Republican Gov. M. Jodi Rell had been negotiating with Democrats in 2009, but then they finalized and passed a plan that became law without Rell’s signature as she opposed certain provisions.
"Rather than trim the bloated bureaucracy and out-of-control spending in Hartford, the governor wants to punish well-managed towns and cities by slashing their funding and demand more from exhausted Connecticut taxpayers," said Republican gubernatorial candidate Tim Herbst of Trumbull. “It's deja vu in Connecticut: Democratic lawmakers kick the can on spending and unfunded liabilities, the state opens a huge budget deficit, and Gov. Malloy demands more tax hikes and misguided cuts to well-managed towns. This cycle of destruction pushed by Malloy and his insider allies for eight years has wrought terrible damage on our economy and pushed many Connecticut taxpayers to the brink.’’
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