Connecticut lawmakers yesterday privately negotiated measures to close an estimated $700 million budget gap for the next fiscal year. Still up in the air is a $1.3 billion securitization plan that would likely involve the issuance of tax-exempt bonds.
Last week, Republican Gov. M. Jodi Rell proposed a deficit mitigation plan, but details have not been made public as five-way talks with the executive and majority and minority leaders of the House and Senate continue before the end of the legislative session next week.
“It’s a confidential process,” said Jeffrey Beckham, spokesman for the Office of Policy and Management, which is part of the executive branch. “I would just advise folks to wait and see what they do.”
Derek Slap, spokesman for the Democratic Senate majority, said a deal appeared to be near but did not elaborate on details.
“We’re pretty close,” Slap said. “We’re about 90% in agreement.”
The 2010 session ends May 5, adding a sense of urgency to negotiations. New state revenue figures are due to be released today.
One measure Rell has proposed publicly is an early retirement package for state workers that Beckham said was expected to attract 2,000 workers. Roughly half of those jobs would likely be refilled but at a lower costs, he said.
Slap said he could not comment on the early retirement package, which involves union negotiations.
Rell and the Democratic-controlled General Assembly have clashed over priorities in addressing the state’s fiscal troubles. Rell allowed the $37.57 billion biennial budget to become law in September — more than two months late — without her signature.
Two weeks ago, however, an agreement was passed and immediately signed into law to address fiscal 2010’s approximately $500 million deficit. The largest items in that measure were the deferral of $100 million of state employee pension contributions and the use of $239 million of rainy-day funds that had been scheduled to be drawn on in fiscal 2011.
The fiscal 2011 budget relies on a $1.3 billion securitization plan that has yet to be agreed upon. In February, the Office of Policy and Management and the state treasurer’s office released a report suggesting six options. The General Assembly favored an option to issue tax-exempt bonds backed by a surcharge on electric utility bills. Rell favors an option that would sell tax-exempt bonds backed by revenue from Keno, a form of gambling.
Lawmakers are waiting for a formal securitization proposal from Rell, Slap said.
Connecticut, the wealthiest state in the nation, is especially vulnerable to volatility in the economy, according to a Moody’s Investors Service rating report. In 2007, Connecticut’s millionaires were less than 1% of income tax filers but paid about 35% of the state’s income taxes.
“Millionaires are accounting for a lot the tax liability,” said Moody’s analyst Nicole Johnson. “When their capital gains are off, it creates quite a swing in the revenue stream.”
In October, Moody’s revised the state’s general obligation outlook to negative from stable citing the use of the one-shots to balance its budget.
“They’ve relied on a lot of one-time measures to close the [2010-2011 biennium] gap so and that in combination with using federal stimulus funds — which most states are — leaves them with a structural budget imbalance,” Johnson said.
Moody’s recalibration this month of municipal credits to a global scale raised the credit one notch to Aa2 with a stable outlook.