It's Official: Sales Tax Cut Will Not Occur January 1; Rell Unveils Over $80 Million In Cuts For Cities and Towns
It's official.
The state's planned cut in the sales tax will not take effect January 1. Many legislators had predicted that the contingent tax cut would never happen because of the continuing weakness in the economy.
But the blocking of the tax cut did not become official until the state comptroller certified - as required by a recent law - that tax collections had falled more than 1 percent below the projections set by the legislature when they finished crafting the budget in September.
On Tuesday, the Rell administration announced that the deficit would be reduced by $129.5 million - the amount that would have remained in taxpayers' pockets if the tax cut was enacted.
At the same time, with the state facing a deficit of nearly $470 million for the current fiscal year, Republican Gov. M. Jodi Rell is asking the Democratic-controlled legislature to make cuts in a wide variety of programs - including aid to cities and towns.
The Connecticut Conference of Municipalities, which represents most cities and towns, calculated the loss to the towns to be at least $84 million in the current fiscal year. CCM vowed to lobby legislators at the Capitol to block Rell's proposed cuts.
"Cutting more state aid in mid-year wouldn't be a savings,'' said a statement released by longtime CCM spokesman Kevin Maloney. "It would merely shift more of the state budget deficit onto local governments and local property taxpayers.''
CCM continued, "Increasing the state's largest and most unfair tax - the property tax - by cutting municipal aid is bad public policy. Zero cuts in municipal aid must be priority one for state leaders. Do the math: cuts in state aid to your hometown equals increases in your property taxes.''
Rell's budget director, Robert Genuario, acknowledged that the state's 3 percent reduction in aid to municipalities - a cut of $84 million out of $2.8 billion - will present a challenge for cities and towns, but he added that they are only "being asked to be a small part of the solution."
He said that municipalities, non-profit agencies and others affected by the cuts are going to have to think differently about how they operate. "Everybody's going to have to rethink the way they do business, as the state has been doing for the last year or so, and we are asking everybody to do that and to participate in this process - because state taxpayers simply cannot afford to fund ... the way we used to do business."
The budget cuts are being proposed after a period of relative plenty, Genuario said. During the two-year budget period before this one, he said "there were greater increases in municipal aid than in any biennium over the course of the last decade. So we are starting at a base of municipal aid that is higher ... than it had been at any time prior to this point."
"When the state had a surpluses and increasing revenues, the governor made it a point to see that municipalities shared in those revenues," Genuario said, adding: "The reverse situation is now in the state, and municipalities will have to be a part of the solution, just as they were a part of the successes."
Tuesday marked the first time that Rell's budget office had publicly released the reality that the proposed sales tax cut of ½ percent will not go into effect on Jan. 1, as called for in the budget approved earlier this year. Throwing out the tax cut amounted to $129.5 million in added revenue, reducing the projected $467 deficit by about 28 percent down to $337 million.
The state comptroller's office has certified in recent weeks that tax revenues have not come within 1 percent of projections, which was required under the budget bill for the cut to take effect, Genuario said. Both OPM and the legislature's Office of Fiscal Analysis have agreed in recent weeks that the fiscal trigger for the tax cut has not been met, and so "this should not be a shocker," Genuario said.
Now that the sales tax cut won't take effect in January, it's gone forever - and, to be reinstated, the legislature would have pass a new tax-cut bill, said top OPM deputy Jeffrey Beckham.
"Clearly, we have to act and act now to cut spending - it is the only option left,'' said House Republican leader Larry Cafero, who is considering runnning for governor. "Connecticut's credit rating and fiscal health are at risk if we do not take steps in the next few weeks to reduce state spending in significant ways. We cannot afford the inaction of the last year that led to the fiscal crisis in the first place. We all knew that the Democratic budget the majority party passed in September was not real and out of balance as soon as it became law.
"We are left with fewer options and even less time to start Connecticut back on a path toward fiscal stability,'' Cafero said.
Several hours before Rell unveiled her plan, Republicans received a briefing that was attended by the ranking members of the tax-writing finance committee and other insiders. Some, though, remained mum when asked why so many Republicans were in the state Capitol at the same time on a non-session day.
Senate President Pro Tem Donald Williams and Senate Majority Leader Martin Looney both said they need to study the detailed plan further.
"We have just received the governor's proposed deficit mitigation plan,'' they said in a joint statement. "It will now be reviewed by our 24 caucus members. The governor and her administration took about a month to compile this plan. It will take us several days to examine its merits and disadvantages. We look forward to working with the governor regarding the state of Connecticut's budget and economy.''
They continued, "Obviously the effects of the global recession continue to be felt here in Connecticut just as they are being felt across the entire United States. Thirty-five other states are currently attempting to close new deficits in their existing budgets."
Ellen Andrews, the executive director of the Connecticut Health Policy Project, said, "The governor's recommended cuts are unnecessary, and would have a disastrous effect on some well established and much-needed programs, many of which have struggled for years with underfunding. The vast majority of the cuts would affect people who can least afford them - the elderly, disabled, people with HIV/AIDS, and the poor.''
She added, "Once again, I urge the governor and the legislature to consider better options, such as recovering the $50 million in annual overpayments to HUSKY HMOs that were uncovered in the recent Comptroller's audit.
We really can do better."
