New Tax Hike Proposed In Malloy’s Latest Offer In State Budget Battle

Gov. Dannel Malloy has submitted his compromise budget to state legislators in hopes of breaking the budget deadlock that has seized Connecticut since July 1.

Malloy’s budget includes a hike in the sales tax to 6.5 percent from 6.35 percent and raising the tax on restaurants to 7 percent statewide. The increase should raise revenue by $87 million in fiscal year 2018 and $133 million in fiscal year 2019. The governor’s proposal is less of an increase than what legislative Democrats have been discussing.

Malloy has been running the state by executive order since July 1 after the legislature failed to pass a budget. As it stands, the estimated biennial budget has a deficit of $3.5 billion. He has previously said he wasn’t in favor of a sales tax increase. (Keep up to date with the latest in Connecticut's budget and local news by signing up for free Patch email news alerts here.)

“We cannot continue down a path of operating the state without an adopted budget – we must meet one another in the middle,” Malloy said. “To reach compromise, I have scaled back some of my proposals, I have adopted some of the best ideas from legislators of both political parties, and I have tried to be responsive to the needs of municipalities within the limited resources the state has at its disposal.”

Among other proposals:

• Budget reforms including voting on collective bargaining agreements.
• Mandate relief for local governments, including reviewing binding arbitration.
• Establish “Passport To Parks," which would add a $6 motor vehicle registration fee but eliminate parking fees at state parks.
• $10 million in bond authorizations each year for six years to help solve the ongoing crumbling foundation crisis in eastern Connecticut.

Republican Senate President Pro Tempore Len Fasano didn't sound pleased with the plan and said that speaking for all Republican it doesn't drive the legislature any closer to a deal.

“The governor’s proposal would be the third billion-dollar tax hike for Connecticut in less than seven years," he said. "It includes tax increases totaling $1.3 billion over the biennium. And this from a governor who pledged to not lead with taxes."

The newest proposal would increase various municipal aid by $136.8 million in fiscal year 2018 and $89 million in fiscal year 2019, compared to his May 15 budget proposal.

It would also be an increase of nearly $900 million from his executive order plan, which as it stands cuts aid drastically to the majority of Connecticut communities. Some of those cuts will go into effect in October if no state budget is passed.

Malloy has also changed his mind on pushing one-third of teacher pension obligations onto municipalities. Instead, he is arguing for cities and towns to pay only for current employees and phase costs in over two years.

He is also walking back on a previous proposal that called for allowing municipalities to tax the real estate of nonprofit hospitals. Instead, he proposes revising provider tax provisions to generate more revenue for the state from hospitals and offsetting some of the cost with federal grant revenue.

Image via Jessica Hill/AP