Wishing for a compromise as the state of Connecticut approaches a season of big spending issues with no state budget in place; Governor M. Jodi Rell offered to raise more than $1 billion in taxes including income tax increases on wealthy residents that she has long criticized on August 26th, 2009.
But Governor Rell, who has been locked in a bitter battle with Democratic officials about whether to increase income taxes or further slash state spending to solve an $8.5 billion 2-year budget deficit, had some demands of her own as she persuaded legislators to create an agreement before September 1st, 2009.
In exchange for giving in to the position of most Democratic officials that income tax increase are unavoidable, Gov. Rell said that she would demand the majority of the party to accept more of her budget cuts: a total of $520 million. The governor also advocated for two tax cuts: a reduction of ½ percentage point in the sales tax, dropping it to 5.5% and the elimination of the inheritance tax on the estates of those who die with $2 million or more in total assets.
The total cuts were projected at $715 million over 2 fiscal years. Rell's announcement brought a hopeful reaction from Democratic officials, who cancelled their plans to vote on their own budget plan without Rell's input and suggested that they could create a budget before legislators for a decision on August 31st, 2009. Senate President Donald E. Williams Jr. (Democrat-Brooklyn) said that they are very encouraged by the proposal of the Gov. Rell.
After Rell spent months insisting that tax increases would affect the economy of the state and families in the midst of the financial crisis, Rell has now twice offered increases in taxes in a move to strike an agreement with the Democrats, who expressed optimism that both sides could reach a deal before the end of the month.
Rell will reluctantly approve an increase on the marginal rate for people earning $500,000 or more and joint filers making $1 million or more. But some questions still remain with Gov. Rell's budget plans.
The proposal would retain $1.2 billion in "securitization" in the 2011 fiscal year-in effect borrowing money up front, to be given back out of streams of expected earning, including proceeds from the lottery. Gov. Rell also quietly cancelled one of her most controversial plans to solve the budget deficit-which is to add keno to the offerings of the Connecticut lottery, which supporters believe could raise at least $40 million yearly.
Keno has faced firm criticism among some of the members of the Senate. Spokesperson Adam Liegeot said that the Gov. Rell has decided that the revenue coming from the game so it was dropped from the budget proposal. House Democrats met in a closed door meeting to discuss the latest developments in the state budget and member of the state Senate were expected to study the proposal via a conference call.
No definite plans for talks among Gov. Rell and legislative officials were announced on Wednesday although Democrats indicated that they will begin deliberations on the budget plans soon.
Contributing to the urgency to create an agreement before September is the combination of vital state grant obligations including funding for towns and cities and the continuing shortfall in revenue of the state could means deep cuts to local governments and state services. Gov. Rell said that she is not yet convinced that they will have the money to pay for everything that is important for the state in September.
[03-09]
John M. Thorpe
