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Just before the scheduled June 5 close of this legislative session, the Connecticut General Assembly passed the new $43.4 billion biennial budget. The budget does not include some hotly debated items like tolls or a shift in teacher pensions and at press time Governor Ned Lamont was expected to sign soon.
Unlike the last state budget, legislators were not touting bipartisan support this time around. On June 3, the House voted 86-65 and on June 4 the Senate voted 20-16, largely along party lines, to pass the budget. Democrats have had the edge in both houses for many years but managed to strengthen their numbers in the November 2018 midterm election.
The approved budget includes increases in education aid to some municipalities, avoids pushing a portion of teacher pension costs onto cities and towns, averts a looming deficit without increasing income tax rates, and makes no provision for the legalization and taxation of marijuana or the implementation of tolls.
However, the budget does rely on millions in labor savings and shifting billions of pension debt onto future taxpayers, and diverts revenue expected to go toward transportation into the General Fund.
The budget does avoid an income tax hike, but several other smaller taxes are introduced or increased. The budget broadens the sales tax by eliminating exemptions on things like parking, dry cleaning, and safety apparel, adds a new tax on plastic bags and e-cigarettes, and increases the alcoholic beverage tax. Small businesses are also being asked to carry a larger tax burden and the budget cancels some previously approved tax cuts for retired teachers and college graduates with student loan debt before those cuts could go into affect.
For shoreline towns, most of which have already approved their local budgets for the coming fiscal year, this state budget should come as a relief as far as municipal aid goes. When Lamont offered his budget proposal in February, his plan would have resulted in deep cuts to education aid in the region.
The legislature opted to distance itself from Lamont on local aid, particularly on Education Cost Sharing (ECS), the state’s primary education grant. The approved budget includes more than $2 billion for ECS and another $290 million for non-education grants in each year.
The Outcome for Guilford
This year, Guilford received just more than $2 million in the ECS grant, but the governor’s proposal would have dropped Guilford’s allocation down to $1,568,902 next year and then to $983,156 the following year. However, the final budget approved by the legislature restores a significant amount of Guilford’s ECS dollars, putting the fiscal year 2020 allocation at $1,961,458 and the following year’s allocation at $1,766,527. Two-term State Representative Sean Scanlon (D-98) said he was pleased to see this restoration of aid.
“Going back to my first year in office, there is almost always an effort to eliminate or dramatically cut our aid and I’ve worked really hard each year to successfully stop or minimize those cuts and will continue to do so for as long as I have this job,” he said.
Guilford’s total state aid for the coming fiscal year under this budget is $2,467,760, a decrease in funding of $195,652 from the prior fiscal year. However, that number is well within the reduction assumed by the Guilford BOF and that reduction is further tempered by the lack of a municipal teacher pension contribution. State Senator Christine Cohen (D-12) said she was pleased to see the teacher pension proposal taken off the table. She said while the broader approach to teacher pensions does involve pushing off or refinancing some portion of the debt to later years, it was a smart choice.
“Just like people refinance their mortgage, this was an important step for the state to ensure we were funding this and that we had a steady look going forward and I think it was the right decision,” she said.
However, State Representative Vincent Candelora (R-86) said it’s not that simple. In 2007, the state bonded $2 billion to shore up the teacher pension fund and was required to contribute a specific amount to the fund each year. He said trying to refinance the debt, and therefor the payments, could face some challenges.
“The governor is seeking a loophole to say that if you can demonstrate an ability to pay, you can essentially refinance the debt,” he said. “So that is where they took the $350 million...from the budget reserve fund and moved it into sort of a savings account and [said] that account demonstrates the State of Connecticut’s ability to pay and therefore they would then claim [that] gives them the legal ability to refinance the debt…
“There was an opinion letter generated saying this could be done and despite my personal request for that letter and I know other members have requested that information, we are told that is attorney-client privilege and we can’t get that documentation,” Candelora said. “So going forward I don’t know if that refinancing would be challenged by bondholders.”
However, Scanlon said that since the pension fund had been neglected for decades, the legislature didn’t have a lot of options.
“One idea was to re-amortize the payments so that they would be spread out over a longer period of time,” he said. “This plan, paired with using some of the money from this year’s budget surplus, was what we ultimately went. Do I love it? Absolutely not. But shoring up our teacher pension fund in the eyes of the bond folks on Wall Street and ensuring we do not reach unsustainable debt payment levels was the best, worst option before us.”
In regard to the final budget, all three Guilford legislators were pleased to see the restoration of municipal aid dollars and a lack of forced teacher pension contributions, but they did not share similar feelings on the budget as a whole.
“Overall, two large outcomes of the budget were significant savings to the district,” said Cohen. “One by fulfilling funding that ECS formula to the 10-year recommended level and two, preventing that shift of teacher pensions. Because those were such huge savings to the district and because we fought really hard to ensure those funding sources remained for our towns, it was really important to me that I supported the budget.”
“I think the budget ended up in a decent place by reversing our education cuts, holding the line on spending ,and not increasing the corporate, income, or sales tax rates,” said Scanlon. “…We have to be careful when striking a balance between asking those of means to pay their fair share and not driving those individuals out of the state.”
“There are things in it that I think were good, but I just don’t have a lot of good to say about the document as a whole,” said Candelora. “I said this on the floor: What do we stand for? This budget document demonstrates what the legislature stands for and I am not sure what this Democratic Party stands for any longer. It was the most regressive tax budget that I have ever seen.”
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