Connecticut leaders to knock heads over budget

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PHILADELPHIA -- Connecticut's Republican legislative leaders say they will meet with Gov. Dannel Malloy in hopes of reaching a bipartisan solution to the state's three-month budget impasse.

Democrat Malloy has promised he would veto the GOP's $40.7 billion biennial spending plan, which passed the legislature Friday after a handful of Democrat lawmakers broke with their leadership.

The Senate is split 18-18 between Democrats and Republicans while the Democrats hold a narrow advantage in the House of Representatives.

More jawboning from both sides erupted Wednesday.

Malloy, speaking at East Hartford Middle School, said the GOP budget would significantly reduce -- and in some cases eliminate -- funding streams for the state's neediest and lowest-performing school districts. Republicans, in a late-afternoon press conference at the state capitol complex, said theirs is the only spending plan in play and Malloy should sign it.

Each side accused the other of contradicting state Superior Court Judge Thomas Moukawsher's order late last year for Connecticut to rework its school-aid formula to benefit needy school districts.

The governor, who has run the state by two executive orders he has issued since July 1, has promised an even more austere one if no budget is in place by July 1.

"The Republican budget pulls the rug out from under school districts that are starting to turn the curve by eliminating many of our education reform initiatives, while at the same time directing increased funding to our most affluent districts," Malloy said.

Malloy added that the funding is necessary to help school districts improve test scores. "We cannot risk rolling back the progress we have made over the last several years."

Speaking to reporters at the legislative office building, the respective Senate and House Republican leaders, Len Fasano, R-North Haven, and Themis Klarides, R-Derby, urged Malloy to sign the budget bill.

"We're at a place now in the middle of September where Oct. 1 is fast approaching," said Klarides.

Fasano disputed comments by University of Connecticut president Susan Herbst that UConn stands to lose $300 million under the GOP budget and said the state's flagship university has other options, including alumni fundraising.

"She has to stop bellyaching about the thing," he said, adding that the budget bill would enable UConn to save money through streamlined procurements.

Fasano said he has yet to meet with Democratic leaders this week.

State budget director Benjamin Barnes said Wednesday that Connecticut projects a general fund deficit of $93.9 million for fiscal 2018. That's consistent with the operating balance expected under Malloy's executive order resource allocation plan, Barnes said in a letter to state Comptroller Kevin Lembo.

The state, if needed and with legislative approval, could transfer money from a municipal revenue sharing account, which has a $94.5 million balance.

Bond rating agencies have cited late and imbalanced budgets and high debt in a multitude of general obligation downgrades over the past 18 months. S&P Global Ratings and Fitch Ratings rate Connecticut GOs A-plus. Moody’s Investors Service rates them A1 while Kroll Bond Rating Agency assigns AA-minus.

"By at least temporarily aligning revenues and expenditures, the state faces little near-term liquidity risk," Moody's Investors Service said in a commentary. "Connecticut, however, faces more long-term pressures: high debt, pension liabilities and fixed costs in the context of a sluggish state economy."

Other Connecticut problems include structural budget imbalance, tax receipts below projections and spiraling fixed costs.

"While the state has taken action to address some of its most pressing financial challenges in recent years, the state's long-term obligations remain formidable," said Moody's.

Connecticut has also lost population three straight years through July 2016 and, according to Moody's, has the third-highest rate of population loss of any state during that time.

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