The Capitol Update: Legislative Alert
February 11, 2014
“There will come seven years of great plenty… but after them there will arise seven years of famine.”
- Genesis: 42
With the convening of the 2014 session of the Connecticut General Assembly, attention was given to Governor Dannel Malloy’s state-of-the-state speech and the budget modifications he proposed. The traditional Republican leadership rebuttal followed.
In dueling finance and tax proposals, Governor Malloy and the opposition leadership in the General Assembly proffered two different plans for future tax relief and fiscal stability.
These proposals come at a time when Connecticut is anticipating its largest budget surplus (over $500 million) in six years. Much of the growth in revenues is attributable to the $1.5 billion tax increase approved in 2011 and an improving state economy.
Governor Malloy’s Budget Proposals
- $55 tax refund to individuals earning less than $200,000 and $110 to joint filers earning less than $400,000. Cost - $155 million.
- Exempt 50% of teachers’ pension from state income tax. Cost - $23.1 million.
- Extend Angel Tax Credit. Cost - $3 million.
- Exempt non-prescription drugs from sales tax. Cost - $16.5 million.
- Remove premium tax from municipal health care plans. Cost - $8.7 million.
- Expansion of elderly renter rebate program. Cost - $6.5 million.
- Two-day state park holiday on fees. Cost - $0.2 million.
Rainy Day Fund
- Deposit $250 million into the Rainy Day Fund.
- $100 million payment to state pension fund.
Republican Budget Proposals
- Restore tax exemption on clothing and footwear for items under $50. Cost - $167 million.
- Exempt non-prescription drugs from sales tax. Cost - $21 million.
- Eliminate special assessment tax on businesses for the state unemployment fund. Cost- $59 million.
Rainy Day Fund and State Pension
- Pay down state debt on state pension fund and place funding in the Rainy Day Fund. Cost - $268 million.
As you can tell, it’s a gubernatorial election year in our state. Candidates can’t contain themselves when it comes to recommending ways to spend surplus budget dollars. Gone are the opposition quotes from 2011 when budget disciplinarians warned future budgets “will come with pain” and predictions of “storm clouds gathering on the horizon.” Or from tax proponents, who claimed we are changing “the way we do business” in our state and we have a commitment “to taking future revenue increases beyond what we are already projecting and using that to pay off debt.” Well, that was yesterday’s attempt at fiscal discipline. As Mark Twain once said, “Denial ain’t just a river in Egypt.”
Indeed, the General Assembly’s nonpartisan Office of Fiscal Analysis projects a $1.1 billion state budget deficit for FY16 and a $1.2 billion deficit for FY17.
Other Legislative Initiatives
Aside from state budget proposals, the legislature and the Governor are expected to pursue a modest social agenda during this short-session of the Connecticut General Assembly. The legislature and the administration will renew efforts to create an Office of Early Education to coordinate early care and education of young children. School safety and the provision of additional mental health services for young adults will continue on the agenda following the Newtown tragedy. Legislators will do a deep dive into the competing interests of for-profit and non-profit hospitals. They will attempt to balance the shaky stability of a number of small hospitals in our state with the interests of the health care workforce and charitable support received locally by these hospitals. Expect a new statewide port authority to be created to jump start the development and marketing of the Bridgeport, New Haven and New London ports. To build on the success of the state sponsored college savings plan, the Governor and the State Treasurer are seeking to establish a CHET Baby Scholars Program to incentivize parents to participate in early savings for future higher education costs. Bills will also be introduced to establish social benefit corporations focusing on societal benefits over shareholder profit. Pivoting off President Obama’s call for a new type of retirement savings account for all Americans, the General Assembly is poised to resurrect a measure from last year to establish a state-administered retirement savings plan for private sector employees. Additionally, the Governor is proposing to mirror President Obama’s effort by increasing the state’s minimum wage to $10.10 by 2017. The legislature again will consider a measure to legalize physician-assisted suicide in this state. Finally, the agenda for the majority Democrats in the legislature anticipates the “graying” demographics of this state by seeking additional resources for the re-employment of older workers and an “aging in place” initiative promoting home and service-based systems for seniors.
The consensus among economists is that this country is finally pulling out of the recession that dramatically plagued the U.S. between March 2008 and February 2010. Most analysts suggest the fundamentals are in place for positive growth. U.S. Gross Domestic Product has been growing at an average annual rate of 2.3% since the recession. Employment has increased by 7 million at the same time, producing a national unemployment rate of 6.6%, the lowest in five years. Continued growth in the national economy is anticipated based on the expansion of the manufacturing community, gains in consumer spending, increases in real exports and rising new home sales.
While not as strong as the nation’s, Connecticut’s economic outlook projects a modest upturn in our economy in 2014. The state’s unemployment rate, currently at 7.4%, is not expected to change this year. The housing market is experiencing moderate growth and personal income is expected to rise by 2.7%. Hiring by small manufacturers has picked up, auto sales continue to increase as drivers replace aging vehicles and the finance, insurance and professional services sectors are expected to rebound. Restraining the state’s recovery will be the aging population, net-out migration, land limitations and rising mortgage rates in the out years.
2014 opens a significant political year in this state. November will bring an election of the governor and the constitutional officers in Connecticut, the entire membership of the Connecticut General Assembly and five Congressional office holders.
In 2010, after a twenty-year hiatus, Democrats finally took control of the Governor’s chair. The current Governor, Dannel Malloy, will be at bat again swinging for the fence. He gained office in 2010 in a hotly contested race with a nail-biting victory margin of 6,404 votes out of approximately 1.1 million cast. Malloy will do his best to tout his administration’s efforts to turn the state’s economy around, clean up the fiscal mess left by previous administrations, promote affordable housing and restructure the delivery of energy in Connecticut.
Currently, four prime Republican candidates are angling to be Malloy’s opponent—former Ambassador Tom Foley, who lost to Malloy last time, Republican Senate Minority Leader John McKinney, Danbury Mayor Mark Boughton and Republican State Senator Toni Boucher. Each of these candidates has attacked Malloy for being the only governor in the country to preside over a state economy with a Gross Domestic Product that fell in recent years. And since his election, Governor Malloy’s favorability rating has never reached 50% (Quinnipiac Poll). Such numbers clearly indicate a degree of vulnerability for the incumbent. What is not clear, at this time, is if the Republican Party in Connecticut can produce a candidate who will be an attractive alternative to Malloy.
Expect no significant change in the Congressional seats in Connecticut or the makeup of the General Assembly. The one race to watch is the contest between incumbent Democrat Congresswoman Elizabeth Esty and Republican challenger Mark Greenberg in the 5th Congressional District.
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