Rell’s Budget Proposal—

No New Taxes As One-Time Revenues

Plug State Budget Gap

By Mark Pazniokas

©The Connecticut Mirror

HARTFORD — In her final State of the State address, Governor M. Jodi Rell Wednesday issued a call for political civility and fiscal responsibility, then proposed a budget that leaves a huge deficit to the next governor and legislature.

Her proposed $18.9 billion budget for the fiscal year beginning July 1 relies on $2.7 billion in federal stimulus dollars, borrowing, and other one-shot revenues and exhausts the last of the state’s fiscal reserves.

Rell proposed a series of fiscal reforms that she says could help establish a foundation for recovery, but she did not deny leaving a horrific balance sheet for whomever is elected governor this fall.

“Quite frankly, the dire circumstances we are facing today will pale in comparison to the challenges that will face the next governor, the next legislature,” Rell said.

With less than a year before she leaves office, Rell proposed creating a 24-member commission that would conduct a top-to-bottom review of government and recommend changes in December.

She tried to sweeten her last budget with a few initiatives, including a job-creation tax credit program and borrowing $100 million to guarantee private-sector loans and provide direct loans to small businesses. The borrowing could leverage $400 million in private lending, she said.

Rell also proposed expanding the sales tax exemption to include materials used in renewable energy and green technology.

“We will rebuild our economy. We will create jobs. And we will put our state back on firm financial footing if we work hard and confront our problems with courage and common sense,” she said.

Rell also proposed a program to forgive up to $10,000 in loans for graduates of Connecticut schools who enter a targeted field in the state: green technology, life sciences, or health-related information technology.

But her budget and her speech were mainly about getting by with less — though much of the pain would be deferred until after the election.

Rell avoided deep, sweeping cuts. She would impose co-pays on Medicaid recipients and increase co-pays for prescriptions covered by Medicare.

Her budget has no tax or fee increases and would increase spending by sixth-tenths of one percent.

She would borrow $1.3 billion against future revenue, drain the last $300 million of budget reserves, sell $45 million in state assets, and raise $20 million by introducing a new form of legalized gambling, Keno.

Senator Toni Harp, D-New Haven, the co-chairwoman of the Appropriations Committee, said Rell’s reliance on one-time revenue guarantees that her successor will be forced to raise taxes in 2011.

“It’s an enormous hole in the next biennial budget, an enormous hole,” Harp said. “We can’t cut our way out of that kind of hole. Whoever becomes governor is set up with having to aggressively tax the people of this state.”

Rell and the legislature also still have to close a $500 million gap in the current-year budget.

“I think she left some heavy lifting for us,” said House Majority Leader Denise W. Merrill, D-Mansfield. “I see a lot of common ground on the job creation. It remains to be seen how we get to the finish line on the $500 million deficit.”

Republicans were more understanding, crediting Rell with highlighting structural problems in her speech, such as the unfunded liabilities for state pensions and retiree health costs.

“She’s trying to get that ball in motion. Whatever she started, the next governor can pick up,” said Lieutenant Governor Michael C. Fedele, a candidate for the Republican gubernatorial nomination.

“We have difficult choices to make,” said Senate Minority Leader John P. McKinney, R-Fairfield. “We’re going to have to cut spending, and we’re going to have to make government more efficient.”

 (This story originally appeared at CTMirror.org, the website of The Connecticut Mirror, an independent, nonprofit news organization covering government politics, and public policy in the state.)