Hartford: Gov. Dannel P. Malloy and state employee unions stand on the cusp of a concessions deal worth close to $1.6 billion over the next two fiscal years, sources close to the talks said.

The agreement features a three-year wage freeze retroactive to the 2016-17 fiscal year. It also would boost pension and health insurance costs for workers and would include fewer than five furlough days.

But it also would extend the controversial state benefits contract with its employees through 2027 — a provision expected to draw criticism from many Republican legislators and some business groups. That provision also largely would remove a contentious issue from the 2022 gubernatorial debate.

Technically, the unions and administration have been engaged in informal talks. Union leaders are expected to meet Monday afternoon to talk about authorizing negotiators  as soon as Tuesday to strike a tentative agreement that could be submitted to the rank and file for a ratification vote.

Malloy, his fellow Democrats in the General Assembly, and Republican legislators all relied on concessions savings to help balance their respective plans for the next two-year state budget.

The governor and Democratic lawmakers both seek savings worth about $700 million in the first year of the coming biennium and $870 million in the second. Sources say the potential deal Malloy and unions are closing in on would be worth close to those amounts.

But separate plans produced by the House and Senate Republicans each count on annual savings closer to $1.1 billion.

State would extend benefits commitment until 2027

The duration of the benefits package offered to state workers has been a point of contention since 1997, when Gov. John G. Rowland and unions struck a 20-year deal.

Many critics have argued the pension and retirement health care components of that deal are too generous, and that it must be allowed to expire so the state can offer alternatives, such as a 401(k)-style, defined contribution plan.

Malloy’s 2011 deal with unions extended the benefits contract through 2022 in exchange for a two-year wage freeze, new restrictions on retirement benefits, increased worker cost-sharing, and an employee wellness plan.

But as surging retirement benefit costs place even more pressure on state finances, some groups came forward recently to urge that any new concessions deal not extend the benefits contract further.

The contract’s existing expiration date of June 30, 2022 would fall in year four of the next gubernatorial term, and candidates for the office would be expected to take a position in the coming months on whether to extend it further.

But if the unions and the state push the expiration date back to 2027, it could not be changed without labor’s permission for another nine years — removing the issue from the next two gubernatorial terms.

Malloy and the unions also have made it clear that state government cannot expect major concessions without extending the benefits deal.

“We are not starting from scratch when we revisit the SEBAC (State Employees Bargaining Agent Coalition) contract,” Malloy told legislators on Feb. 8 in his annual budget address. “While it is fair for us to ask for savings, it’s equally fair for our employees to also ask for changes as long as the end result is a more affordable and more sustainable labor agreement.”

Council 4 of the American Federation of State, County and Municipal Employees — one of the largest state employee unions — wrote in a recent post on its website that extending the benefits deal was a key priority.

As a union we are working our hardest to avoid layoffs, service cuts and reductions to our pay, pensions and health care. We certainly have not been dragging our feet,” the statement reads. “Throughout the process, we have been guided by several important principles, including the need to secure protections against layoffs and contracting out, to offset the impact of wage freezes, and to extend the current health care and pension agreement.

“Our goal is not simply to protect our members’ jobs and services, but also to prevent an economic disaster that would inevitably result from layoffs, wage and benefit cuts and the loss of bargaining rights.”

govbannerDemocrats would slash municipal aid, allow casino, legalize pot

By Keith M. Phaneuf

Hartford: House and Senate Democrats Tuesday recommended opening a new casino, legalizing marijuana and imposing deep cuts to municipal aid and public colleges and universities to balance the next two-year state budget.

And while their plan begins the process of establishing tolls in future years, it strips transportation reserves in the short term while selling 35 acres in Hartford along the elevated Interstate 84 highway to keep the state’s transportation program afloat.

The Democratic plan consolidates several departments, retains but reduces the public financing program for state elections and closes an unnamed prison, the Connecticut Juvenile Training School and the Southbury Training School.


CTGOPBy Keith M. Phaneuf

Another question of public access arose Monday in the struggle to balance the next state budget.

While Gov. Dannel P. Malloy and three of the four legislative caucuses either have released — or have agreed to release — their latest proposed budget adjustments to the public, the Senate Republican caucus took a different approach this week.

Nicole Rall, spokeswoman for Senate Republican leader Len Fasano of North Haven, said the caucus intends — at least initially — to share its plans to close a major shortfall in the next budget only with Malloy’s office and with leadership from the other caucuses.

“At this time it is not the plan to share it publicly at the same time it is shared with the Democrats and the governor,” Rall said.

The governor released to the public Monday a detailed series of revisions to his budget proposal for the next two fiscal years. Analysts warned on May 1 that General Fund revenues, largely because of eroding income tax receipts, probably will produce about $1.5 billion less in revenue during the coming biennium than originally projected.

Spokespeople for the House and Senate Democrats and for the House GOP also said Monday they would release details of their own budget adjustments to the public at the same time they are shared with each other and the governor.

Fasano’s position on this issue of public disclosure could complicate Republicans’ efforts to present a unified position on closing the projected deficit.

Senate and House Republicans released a joint plan to the public on April 27 — before the latest revenue erosion left all budget proposals way out of balance.

Sources said Senate and House Republicans still were working jointly Monday to develop a joint, revised proposal with the goal of completing it Tuesday. But they also said that House Minority Leader Themis Klarides, R-Derby, still intends to make any proposals her caucus supports available for public review.

House and Senate Democratic leaders have said they intend to release a joint plan Tuesday to compensate for the revenue erosion.

This isn’t the first issue of transparency to complicate the latest budget debate.

Senate Democrats recommended earlier this month that all budget negotiations be open to the public and televised on The Connecticut Network channel.

House Democratic and Republican leaders said they would accept that, but Malloy and Fasano both argued it would lead more to political posturing than to effective negotiations.

Leaders say they are continuing to discuss the idea but, absent a consensus on that proposal, they will continue to meet privately.

aersimowicz and ritter
Speaker Aresimowitz [L], won't rule out new taxes, including on the "wealthy", Majority Leader Ritter, new taxes haven't pulled in the anticipated money.

House speaker: Deficit too great to rule out income tax hike

By Keith M. Phaneuf.

While insisting he remains very sensitive to the economic risks posed by another state income tax increase, House Speaker Joe Aresimowitz, D-Berlin, said Tuesday he would not rule out another hike — including one on wealthy households — given the massive deficits projected for state finances.

Aresimowicz also urged other lawmakers and Gov. Dannel P. Malloy to focus first on a plan to stabilize state finances over the long term.

“I still refuse to enter the negotiations taking anything off the table,” Aresimowicz said, noting that neither party nor branch of government has offered a plan to date that comes close to solving the budget crisis.

A new forecast released Monday, driven largely by eroding state income tax receipts, warned Connecticut will have nearly $1.5 billion less to spend over the next two fiscal years than originally anticipated.

And state finances already were headed for a major shortfall in the coming biennium.

Based upon the latest numbers, state finances — unless adjusted — will run $2.2 billion, or more than 11 percent, in deficit in the 2017-18 fiscal year.

And that gap swells to $2.9 billion, or 13.5 percent, in 2018-19.

These are the largest potential gaps since the 18 percent potential shortfall Malloy and the legislature tackled in 2011.

Each of the projected deficits for the next two years is larger than the value of any single state tax except for the income and sales levies.

The $2.9 billion deficit in 2018-19 is larger than any line item in the entire state budget, surpassing such giants as Medicaid, debt service, pension fund contributions and the Education Cost Sharing grant program.

“As the hole in the budget grows, the options become more limited,” Aresimowicz said.

With that in mind, the speaker added, he couldn’t rule out income tax hikes on the wealthy or on the middle class at this point.

Noting that both he and Aresimowicz voted for income tax hikes to close major deficits in 2011 and 2015, House Majority Leader Matt Ritter, D-Hartford said, “I don’t wear it as a badge of honor.”

Ritter acknowledged that income tax increases haven’t produced revenue gains at the pace originally anticipated. “It’s hard to ignore that reality,” he said.

Given that history, Ritter added afterward, he would not consider an income tax hike unless the current revenue trends in this area improve.

But Aresimowitz added he wants to position Connecticut to grow when the budget process is complete, and that can’t happen if annual deficits recur year after year.

“Let’s make sure we’re not finding ourselves in this boat again,” Aresimowicz said.

Malloy, also a Democrat, has been urging lawmakers to make revenue a secondary solution to the budget crisis, letting spending cuts do the bulk of the work.

The governor also urged legislators this week to resist discussions of further income tax hikes on the wealthy, noting that Connecticut’s economy — and the state budget — are heavily reliant upon the financial services sector, and hedge funds in particular.

“Be careful what you’re saying about them,” he said. “This is an important industry.”

The bulk of the latest income tax erosion was tied not to paycheck withholding but to quarterly filings, most of which involve capital gains, dividends and other investment-related earnings.

According to the governor’s budget office, the state’s 100 largest income taxpayers paid 45 percent less this year than last.

The Finance, Revenue and Bonding Committee conducted a public hearing last week on a proposal to increase the top marginal rate on the income tax from 6.99 to 7.49 percent. But the panel did not recommend that hike, which would have applied to households earning more than $500,000 per year.

Comey testifies 768x497Comey: No regrets over Clinton emails, but he’d rather have been on the CT shore

By Ana Radelat

Comey: No regrets over Clinton emails, but he’d rather have been on the CT shore

Washington: – FBI Director James Comey on Wednesday vigorously defended his handling of a probe into Hillary Clinton’s emails and deflected Sen. Richard Blumenthal’s questions about whether President Donald Trump was a target of an FBI investigation into Russian meddling in U.S. elections.

During a Senate Judiciary Committee hearing, Comey confirmed to Blumenthal that his agency is investigating whether there are Russian ties to the Trump campaign and said the names of suspects in that investigation are being disclosed to the GOP chairmen and the top Democrats on the House and Senate intelligence committees.

Blumenthal, a member of the Judiciary Committee, pressed Comey on whether Trump was among those targeted by the investigation.

“I’m not going to comment on anyone in particular, because if I say no to that, I have to answer succeeding questions,” Comey replied.

Trump tweeted Wednesday, “The phony Trump/Russia story was an excuse used by the Democrats as justification for losing the election.”

The tweet was an apparent response to Clinton’s comments Tuesday in which she blamed the FBI and Russian hackers for her electoral loss.

Much of the hours of questioning centered on Comey’s decision to notify Congress, less than two weeks before the presidential election, about new emails relating to the investigation of former Secretary of State Clinton’s use of a private email server for official business.

Blumenthal asked if he regretted that move, or would have done anything differently.

“The honest answer is no,” Comey said. “I’ve asked myself that a million times because, Lordy, has this been painful. The only thing I regret is maybe answering the phone when they recruited me to be FBI director and I was living happily in Connecticut.”

Comey moved to Connecticut in 2010 to become the general counsel for Bridgewater Associates, based in Westport.

About his handling of the Clinton email investigation, Comey told Blumenthal, “I’ve got all kinds of rocks thrown at me, and this has been really hard.”

”But I think I’ve done the right thing at each turn…I would have not have done it any differently,” Comey said. “Somehow I would have prayed it away, wished it away, wished that I was on the shores of the Connecticut Sound, but failing that I don’t have any regrets.”

Earlier in the hearing, Comey said it made him “mildly nauseous” to think his disclosure could have altered the course of the election.

Clinton and her supporters maintain it did.

Blumenthal also pressed the FBI director on whether he thought a special prosecutor should be appointed to handle the investigation into possible Russian ties to the Trump campaign.

“That’s a judgment for the deputy attorney general on this matter and not something I should be commenting on,” Comey responded.

Blumenthal is pressing for a special prosecutor because he says neither the FBI nor the congressional intelligence agencies that are investigating whether Russia tried to alter the outcome of the presidential election can bring criminal charges against anyone. Only the deputy attorney general, a Trump appointee, has the authority to do so if an independent prosecutor is not in place.

Blumenthal scored one win when he asked Comey if he supported efforts to expand FBI background checks of gun purchasers.

“The more information we have the better, from a law enforcement perspective,” Comey replied.

Blumenthal said, “I’ll take that as a ‘yes.’”


Rep Jason Rojas, D-East Hartford: Taxing non-profits are an option.

Finance panel eyes ending sales tax exemption for nonprofits

By: Keith M Phaneuf

Hartford: The Connecticut legislature’s tax-writing panel is considering a measure that would repeal the sales tax exemption on goods and services sold to nonprofits — a provision that saves these entities more than $200 million per year.

Democratic leaders of the Finance, Revenue and Bonding Committee said this proposal, which will go to a public hearing next week, is part of an ongoing exploration of possible widening of Connecticut’s sales tax base.

But the top House Republican on the committee and the state’s largest nonprofit association cautioned it could harm the nonprofit community at a time when Connecticut relies on it the most.

“At this point we are just hearing it,” Rep. Jason Rojas, D-East Hartford, House chair of the Finance committee said. “I think we have to take all (revenue) options seriously.”

The General Assembly and Gov. Dannel P. Malloy are trying to close major projected deficits in the next two-year state budget — a problem driven in part by surging retirement benefit costs tied to more than seven decades of inadequate funding.

State finances, unless adjusted, will run $1.4 billion in deficit next fiscal year, and $1.6 billion in the red in 2018-19, according to the legislature’s nonpartisan Office of Fiscal Analysis.

The Malloy administration pegs the shortfall at slightly more, forecasting potential deficits of $1.7 billion next fiscal year and $1.9 billion the year after that.

According to nonpartisan analysts, the sales tax exemption saves nonprofits about $216.2 million per year. Analysts also project that if the exemption were repealed, the state would see an annual revenue gain of $203.3 million.

Both Rojas and Sen. John Fonfara of Hartford — the Senate Democratic chair — said that while the tax panel’s deadline for approving bills is April 28, no consensus on whether to repeal the exemption for nonprofits has been established.

“We have not tested it or vote-counted it or anything like that,” Rojas said.

The two Democratic leaders said early in the 2017 legislative session that they would explore options to bolster sales tax receipts, including both broadening the base and increasing the 6.35 percent tax rate to help close the projected budget deficit.

The sales tax has been the second-largest source of revenue for the budget since 1991, when it relinquished its status as the top revenue engine to the new state income tax.

Though less volatile than the income levy, the sales tax is expected to face a slight hit in the next few fiscal years as Connecticut’s economic recovery lags the nation’s.

Sales tax receipts, which are expected to total nearly $4.25 billion this fiscal year, are projected to drop to about $3.9 billion next fiscal year and rebound partially to $4 billion by 2018-19, according to analysts for the legislature and for the Malloy administration.

Fonfara and Rojas both said a sales tax increase would be less harmful to the economy than boosting state income tax rates.

Malloy has said on several occasions that efforts to close the projected deficits in the next two-year budget should rely more on spending cuts than tax increases.

But one of the governor’s revenue proposals — requiring communities to pay one-third of the annual contribution to the teachers’ pension fund — has garnered significant criticism from lawmakers of both parties.

Some Democratic legislators have said these pension bills, which would total $408 million next fiscal year and $421 million in 2018-19, could be reduced or eliminated if sales tax receipts are increased.

Rep. Chris Davis of Ellington, ranking GOP representative on the finance committee, argued such an increase might be counter-productive, noting that as state government continues to scale back social service programs to close budget deficits, it increases its reliance on community-based nonprofit social services.

“To add an additional tax burden onto these groups, that are doing the bulk of the (social services) work in our communities, might be the wrong direction,” Davis said.

The executive director of the CT Community Nonprofit Alliance expressed similar concerns.

“After a decade of budget cuts with more pending, Connecticut’s nonprofits are alarmed that lawmakers are considering a sales tax change that in the first year alone would take $200 million away from services provided by organizations like homeless shelters and food pantries,” Executive Director Gian-Carl Casa said. “Nonprofits have long been exempted from sales tax here and across the country for good reason: They provide services in their communities that government cannot. Eliminating that exemption would divert funds from programs for individuals with developmental disabilities, people struggling with substance abuse, victims of domestic violence, and arts and cultural programs, to name just a few.”

Two advocacy groups pitched sales tax increases to legislators earlier this year.

The Connecticut Conference of Municipalities proposed raising the rate to 7 percent and broadening the range of goods and services subject to the tax to raise about $700 million annually.

And Connecticut Voices for Children, a New Haven-based progressive policy group included a sales tax hike on a list of revenue-raising options to protect health care, education and social services.

Connecticut Voices estimated $1.5 billion extra could be raised annually by applying the tax to a much broader range of items. Lawmakers also could expand the base and reduce the sales tax rate from 6.35 percent to 5.5 percent and still boost sales tax receipts by $730 million per year, the group said.