Connecticut Gov. Dannel Malloy on Wednesday proposed a $18.27 billion general fund budget for fiscal 2012 that doesn’t borrow for operating expenses and would reduce a planned deficit borrowing in the current fiscal year.
“We borrow not one penny for operating expenses,” Malloy said in a speech before the General Assembly. “Too much borrowing over the years for ongoing expenses is one of the reasons we’re in the bad shape we’re in.”
With revenues dropping sharply during the recession, the state sold $950 million of economic recovery notes in 2009 to close operating deficits.
The biennium budget, Malloy’s first since the Democrat was elected in November, relies on tax increases, spending cuts, and union concessions to close a projected $3.19 billion deficit.
The proposal calls for $18.71 billion of general fund spending in fiscal 2013. Under the proposal, the state would realize projected surpluses of $192 million in the next fiscal year but $72.8 million of that would be reserved for the state’s shift to generally accepted accounting principles budgeting from the state’s current modified cash basis.
Malloy called for $43 million of surplus funds to be used to reduce the planned $646 million issuance in fiscal 2011 of economic recovery revenue bonds secured by a charge on electricity bills.
His budget calls for bond authorizations totaling $1.97 billion for each of the next two fiscal years. The majority of the bonds, $2.19 billion, would be general obligation debt, while $1.09 billion would be for transportation and secured by special taxes.
The budget would also call for new clean-water bond authorizations of $658.4 million.
Since 2001, Connecticut has sold $14.08 billion of new-money bonds and $4.8 billion of refunding bonds, according to Thomson Reuters.
Malloy’s budget would close the deficit with $1.5 billion of additional taxes, $1 billion of union concessions, and $758 million in spending cuts in the next fiscal year. The governor said that concessions from state employees were needed because “their current wage, health care, and pension benefit levels are simply not sustainable.”
On the taxing side, Malloy proposed raising income taxes beginning at $50,000 for individuals and $100,000 for joint filers to raise $620.8 million in fiscal 2012. Income tax increases would range from 0.5% to 1.5%, depending on income level. Earners with adjusted incomes of $100,000 or greater would account for 63.7% of the additional revenue.
The budget would also eliminate a property tax credit to generate $365 million.
At the same time, Malloy is seeking an earned income tax credit for low-income families and individuals that would cost the state $108 million.
Various sales tax increases or new taxes — including the imposition of taxes on clothing and footwear under $50 — and the elimination of exemptions would generate $461 million.