With the Connecticut legislature about to begin its review of Governor Dannel Malloy’s two-year budget, the spending plan is being criticized from many angles.Governor Malloy was open about the difficult decisions that went into his two-year, $40 billion budget proposal. A current $1 billion deficit hangs over the second-term Democrat and Connecticut’s Democratic-led General Assembly.
“Of course, making smart choices usually means making tough choices,” Malloy said. “The budget I present to you is filled with tough choices. All told, my proposal contains more than 590 million dollars in cuts to the current services budget. The vast majority of these cuts are choices that, under ideal circumstances, Connecticut would not have to make.”
During his budget address, Malloy said Connecticut needs to keep momentum going around recent economic growth. With 75,000 new private sector jobs in the past four years, he said the state has regained 94 percent of the jobs lost during the recession. The Democrat is proposing cutting business tax credit values by half, which the Connecticut Business and Industry Association says will curb growth. Joe Brennan is president and CEO.
“The things that were targeted – tax credits around research and development, purchases of electronic data processing equipment, capital purchases – those things are put in law to encourage investment in Connecticut and by reducing those credits we feel will have a chilling effect on investment in Connecticut,” Brennan said. “So could it have a have an impact on our job growth? I absolutely think they could if they were adopted.”
A report by the 10,000-member organization says businesses will be hit by $496 million of Malloy’s proposed $900 million in revenue increases over the next two years. Brennan says a proposal to cut in half the amount of net operating loss a company can carry forward to the next year will cost businesses $153 million in the first year alone.
“It’s not just the cost it’s the uncertainty and the lack of predictability in your tax code,” he said. “I’ve already heard from companies that are questioning their investments now because they’re not sure if something is going to pass or not. So just putting these things on the table does have an impact.”
Malloy is proposing to eliminate the business entity tax, which at $250 every other year, Brennan sees as more of a nuisance removal. Brennan says the CBIA is supportive of Malloy’s proposed transportation overhaul, but the cost burden needs to be considered.
Meanwhile, a report from Connecticut Voices for Children finds Malloy’s plan cuts $316 million or five percent of the so-called “Children’s Budget,” defined as safety, health and education services for youth. Executive Director Ellen Shemitz says the Children’s Budget represents one-third of the state’s general fund, but is targeted for 53 percent of overall cuts. She says capping K-12 state educations grants puts greater burdens on towns.
“It puts a squeeze on the amount or level of services that are available at the town level,” Shemitz said. “But it also means that some costs simply can’t be decreased at the town level and so in order to meet bottom line educational budget costs taxes are going to have to go up the towns. Those are property taxes which are a regressive tax.”
Connecticut Voices for Children is also opposing a move it says would eliminate Medicaid coverage for 30,000 pregnant women and parents with income above 138 percent of the federal poverty line. Shemitz say delaying an increase in the earned income tax credit, expected to generate $22 million in state revenue over the next two years, is a failure.
“That is a cut and a loss that harms those families which need that income dramatically,” she said. “These are some of our poorest working families. The EITC allows them to maintain some of the funds that they earn so that they can raise their children and yet we’re not doing that.”
Malloy is continuing his push for statewide full-day kindergarten, but is also calling for $61 million in higher education cuts, according to Connecticut Voices for Children. The General Assembly’s Appropriations Committee is expected to hold its first public hearing on Malloy’s budget Tuesday. Budget debate typically lasts through June.
