HARTFORD, Conn. (AP) - Gov. Dannel P. Malloy on Wednesday unveiled a two-year budget plan that assumes $1.5 billion in state employee givebacks and shifts hundreds of millions of dollars of costs onto cities and towns, while reducing tax credits for low- and middle-income families.
The Democratic governor announced his $40.6 billion proposal for the next two fiscal years that begin July 1 before a joint session of the General Assembly, where Democrats hold a slim House majority and are tied with Republicans in the Senate.
The announcement came as Connecticut faces a projected $1.7 billion budget deficit next fiscal year and a $1.9 billion deficit the following year, due to lower-than-expected revenues in the sluggish economy, administration officials said.
Spending would increase nearly 1 percent next fiscal year and nearly 2 percent the following year.
“Our economic reality demands that we re-envision state government,” Malloy said. “Together, we need to provide essential, core services and we need to find ways to do it at less cost to taxpayers.”
Administration officials and state employee labor union leaders are currently in talks about savings. Malloy said he is confident an agreement can be reached but if one isn’t, the budget calls for laying off about 4,200 state workers. That would be about 10 percent of the workforce.
Malloy is calling for nearly $1.4 billion in spending cuts and about $300 million in additional revenues in the next fiscal year. The extra revenues would include $200 million in tax increases, including eliminating the $200 property tax deduction from state income tax returns and reducing earned income tax credits for poor families.
The cigarette tax would increase from $3.90 to $4.35 a pack, tying Connecticut with New York for the highest state cigarette tax in the country.
Malloy is not proposing any increases to the income or sales taxes.
Republicans and industry groups criticized the budget plan Wednesday.
“Once again we see a plan that will balance the budget on the backs of working and middle class families while shifting problems onto others,” said Senate Republican President Pro Tem Len Fasano. “I don’t see this budget creating stability. I see it creating chaos.”
The budget also shifts $400 million of the annual $1.2 billion cost of teacher pensions to cities and towns from the state, which now shoulders all the cost. Some city and town leaders have said that would force major property tax increases.
While total state aid to cities and towns would remain about the same, Malloy’s budget would shift millions of dollars from wealthier towns to cities and other needy municipalities.
To help cities and towns, Malloy’s budget would allow them to tax hospital property that is now tax-exempt. The move would bring in about $212 million in new property tax revenue for municipalities.
To help hospitals offset the new property taxes, the budget plan includes $250 million in new compensation to hospitals.
The Connecticut Hospital Association called taxing hospitals “a direct attack on the fabric of our communities.” The group said hospitals and patients already have been harmed by a state hospital tax imposed several years ago.
Malloy also wants to shift some state education aid from wealthier towns to the neediest communities, to make the education funding system fairer.
Please read our comment policy before commenting.