Connecticut Nudges Toward Compromise on Late Budget

Connecticut lawmakers took baby steps toward compromise yesterday on a two-year fiscal 2010-11 budget that is already 31 days late, offering new proposals that include a mix of tax increases, budget cuts, and borrowing.

Republican Gov. M. Jodi Rell’s new alternative $36.9 billion budget proposal included tax hikes, a move she had resisted all year, but was weighted toward spending cuts to close a $8.55 billion two-year gap.

Earlier this month Rell vetoed the $37.9 billion budget passed by the Democratic-controlled General Assembly that included a menu of tax increases that she opposed. The Assembly’s new budget proposal would reduce some of the tax hikes from its earlier budget while adding more spending cuts and sweeping funds from various government accounts.

Both budgets include securitization, though it wasn’t clear yesterday whether they would involve bonds. The Assembly budget calls for the securitization of future lottery proceeds to provide $835 million in fiscal 2011, while Rell’s budget proposes a $1.05 billion securitization but doesn’t specify what revenue streams would be used and further details weren’t immediately available.

While the two proposals both call for increased taxes, Rell’s relies on “sin taxes” on alcohol and cigarettes and a temporary, three-year surcharge on corporate taxes to raise $391 million. The Assembly’s budget is weighted toward increases in personal income taxes on the wealthiest residents to raise $1.24 billion. It also includes a temporary surcharge on corporate taxes and higher cigarette taxes.

The two budget proposals diverge greatly on spending cuts as well, with Rell proposing $1 billion of cuts and the Assembly slashing spending by a much more modest $129.8 million.

In the absence of a budget, state operations have been funded by an executive order since July 1. Rell issued another executive order yesterday to fund operations in August.

“We all know the economy has worsened — and we still don’t have a budget,” the governor said in a  press release. “We need a budget. We need to work together and do the job that the people of Connecticut elected us to do.”

Rell said the Democrat’s latest proposal is “unsustainable and unaffordable.” Democrats continued to press for the wealthiest state residents to pay more.

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