Connecticut governor proposes budget tweaks to reduce deficit

[February 06, 2018]  By Stephanie Kelly

NEW YORK (Reuters) - Connecticut Governor Dannel Malloy on Monday proposed several adjustments to the state's biennial budget in an attempt to reduce a projected general fund deficit in fiscal 2020 to $844 million from nearly $2.2 billion.

Malloy's recommendations include several general fund spending reductions, such as decreasing growth in municipal aid and eliminating municipal aid grants to wealthy communities, according to a presentation by the governor's office.

He also proposed measures to increase revenue, including maintaining the state's hospital tax at fiscal 2018 and 2019 levels, eliminating Connecticut's $200 property tax credit for state residents, and increasing the tax on cigarette packs, according to the presentation.

"Our main objective in this proposal is to provide legislators with workable solutions that will bring the budget into balance and keep it there," Malloy, a Democrat, told a news conference.

At the same time, he also proposed $141 million in additional general obligation bond authorizations in fiscal 2019.

Connecticut was the last state to enact a budget for fiscal 2018, which began for most states on July 1. Malloy signed a $41.3 billion, two-year state budget into law in October, nearly four months late.

Senate Republican President Pro Tempore Len Fasano criticized the governor and his recommendations in a statement on Monday.

"(Malloy) is living up to the labels that have ruined Connecticut's image across the country," Fasano said. "He is going back to what he has always said: 'Let's tax more!' His proposal would move Connecticut backwards."

Connecticut governor Dannel Malloy speaks at the Democratic National Convention in Philadelphia, Pennsylvania, U.S. July 25, 2016. REUTERS/Mike Segar

Malloy also recommended ways to protect Connecticut from potential impacts of the new federal tax bill. One proposal would allow municipalities to create charitable organizations supporting town services, according to the presentation.

The sweeping Republican tax bill signed into law by U.S. President Donald Trump introduced a $10,000 cap on deductions of state and local income and property taxes, known as SALT.

The SALT provision will affect many taxpayers in states with high incomes, property values and taxes, including Connecticut, New York, New Jersey and California.

On Jan. 26, Malloy, along with the governors of New York and New Jersey, announced that the three states had formed a coalition to sue the federal government, challenging the constitutionality of the federal tax bill. The lawsuit has not yet been filed.

(Reporting by Stephanie KellyEditing by Daniel Bases and Matthew Lewis)

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