Governor Malloy presented his FY 2018-19 Budget proposal before a joint session of the Connecticut General Assembly. The $20 Billion budget includes $700 million in labor givebacks, steep cuts for many towns, a dramatic change in how teachers’ pensions are funded and the ability to tax hospital real estate.
Governor Malloy is currently negotiating with state employee unions in an effort to achieve the $700 million in labor savings. If these talks are not successful, it may be necessary to reduce staffing by as many as 4,200 full-time employees.
A change in the way municipal aid is distributed would result in 31 “winners” and 136 towns seeing a reduction in payments. Hartford was the biggest winner with an additional $47.3 million.
The Governor’s budget would also require municipalities to contribute one-third of the employer share of teachers’ pensions. Currently the state is responsible for 100% of contributions. Municipalities will be required to contribute $407.9 million in FY2018 and $420.9 in FY2019.
Hospitals would see their real property tax exemption eliminated, resulting in $212.2 million in property tax revenue.
Apparently heeding the outcry from the business community over past budgets, the Governor did not propose increasing corporate profit taxes. He is recommending that the Insurance Premiums Tax be reduced from 1.75 percent to 1.5 percent.
The budget also makes changes to the Estate Tax which has been noncompetitive and partly responsible for driving wealthy individuals from Connecticut. This proposal would phase in an increase in the Estate Tax exemption from $2 million to the federal level of more than $5 million over three years. The maximum lifetime cap on the amount that would be paid under the estate and gift tax will be lowered from $20 million to $15 million.
The Appropriations and Finance, Revenue and Bonding Committees will now get to the hard work of crafting a budget that both sides of the aisle in the legislature and the Governor can agree on. This will be a herculean task given the size of the state budget deficit and the resistance to tax increases among many in the legislature.