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August 23, 2019Cart

Business

by Fairfield County Business Journal
by FCBJ

Malloy signs state budget, but employs line-item veto

Following several days of will-he-or-won’t-he, Gov. Dannel Malloy signed into law the two-year, $41.3 billion bipartisan budget agreement on Oct. 31.

The governor line-item vetoed appropriations in support of a new hospital tax proposal, citing its unsound legal basis in federal law, and asked lawmakers to pass what he called “the workable language” his administration had provided to “make the proposal legal and successful.”

The governor and his administration have told legislators that language concerning the hospital tax could put about $1 billion in federal funding at risk. The federal revenue is tied to the tax as part of a complicated reimbursement formula.

Malloy released a detailed signing statement outlining his rationale for signing the budget, as well as a number areas of policy disagreement and fiscal concern he said his administration will monitor in the months ahead for potential action and fixes from lawmakers in the legislature.

The governor also sent a letter to legislative leaders urging them to amend the hospital tax language to bring it in line with federal law.

“After 123 days without a budget, it is time to sign this bipartisan bill into law and continue the steady and significant progress our state has made over the past several years,” Malloy said. “Connecticut’s families and businesses deserve to have a budget in place, one that provides a stable environment to live and work. While there are certainly many provisions of this budget I find problematic, there’s also a clear recognition of many of the fiscal priorities and concerns I’ve consistently articulated since January.”

The governor took credit for several of the provisions in the budget that he said reflected his policy priorities. Among those, the budget:

  • creates a Municipal Accountability Review Board, as proposed by Malloy, which will play a role in bringing the City of Hartford back from the brink of bankruptcy and providing the state the necessary tools to intervene early to restore fiscal stability to struggling towns and cities;
  • makes the full actuarially required contribution payments to the state employee and teachers’ pension systems and does not rely on “stealing” from pensions – “a clear line drawn by Governor Malloy throughout his administration,” according to his office;
  • restores much of the higher education funding cuts to UConn and the Connecticut State Colleges and Universities system contained in the vetoed SB 1501 as amended by Senate Amendment B;
  • includes a formula-driven education cost sharing grant that recognizes the impact of poverty and English language learners in the state’s highest-need communities;
  • includes structural changes, including a constitutional spending cap, municipal mandate relief, and required votes on all collective bargaining agreements by the legislature, which the governor proposed in 2011;
  • adopts changes to the Estate Tax and Insurance Premium Tax proposed by Malloy, which are designed to enhance Connecticut’s economic competitiveness; and
  • supports an initiative to assist residents with crumbling foundations.

The governor’s signing statement also covered a number of areas of concern for the administration, which include:

  • “Damaging sweeps” to energy funds, which require the state to take ratepayer funds that were collected in order to lower energy costs overall through investments in efficiency and clean energy. “In the coming weeks,” his office said, “the administration will outline more specific ideas to address these cuts, avoid their immediate negative impact on consumers, and ensure that Connecticut can maintain its commitments to clean energy investments in the energy marketplace.”
  • Cuts to economic developments programs that have “helped preserve and create tens of thousands of jobs in recent years.”
  • “Problematic assumptions” on both the revenue and expenditure sides of the budget, “which could be unachievable over the biennium and contribute to exacerbated structural deficits in the out years.”

“While this may be a step in the right direction, make no mistake about it – this is by no means a perfect document and it is not one I would have negotiated,” Malloy said. “There are real legal and structural issues with the budget presented to me, and I have concerns about the state’s ability to keep it in balance over the biennium and beyond.

“That’s why, along with my signature, I am also line-item vetoing a component of the budget relating to the supplemental payments to hospitals that would leave Connecticut taxpayers exposed to legal challenges and a potential $1 billion budget shortfall per year,” he continued. “I strongly urge my colleagues in the General Assembly to convene as soon as possible to pass a legal alternative to the illegal hospital tax and troublesome supplemental payment and rate language presented in the bill.”

Read the governor’s full signing statement here, and his letter to legislative leaders here.

While lawmakers could try and override the line item veto, Senate Republican Leader Len Fasano (R-New Haven) said he believed the General Assembly would return soon to pass compromise language reached between Malloy’s administration and the Connecticut Hospital Association, most likely over the next two weeks.