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Rell's Plan To Tax, Spend Wows Democrats, Jars GOP

February 8, 2007
By CHRISTOPHER KEATING, Capitol Bureau Chief

Words like "historic" and "brilliant" flew around the state Capitol Wednesday as legislators struggled to absorb details of Gov. M. Jodi Rell's two-year, $35.8 billion budget plan, which includes proposals for record-setting increases in education spending.

The question was, were Democrats or members of her own party more taken aback?

"I have to take a pill," Sen. William Nickerson said to a Greenwich Republican colleague after the governor's speech.

Rell called Wednesday for education spending that would break the state-mandated spending cap and lead to a 10 percent increase in the state income tax. In doing so, she co-opted traditional Democratic issues such as education, but also increased her leverage in dealing with a potentially hostile legislature that has veto-proof majorities in both chambers.

Normally, a governor facing a General Assembly dominated by the opposing political party could be seen in a weakened position, but insiders said Rell helped herself Wednesday.

"Frankly, you could just put a Democratic head on her shoulders because it sounded more like a Democratic response to major issues in our state," said Rep. Christopher Caruso, a Bridgeport Democrat. "It was a brilliant political move. Here she is surrounded by 107 Democrats in the House, realizing that her veto is meaningless."

Throughout her 22-year public career as a legislator, lieutenant governor and governor, Rell has been known to many as a fiscal conservative. As such, Republicans were flabbergasted by her plans to raise taxes and to raise both education spending and the income tax over five years by $3.4 billion.

During a 39-minute speech that was interrupted by applause 35 times, Rell offered a sweeping series of proposals and a detailed, futuristic vision. From hiking taxes to breaking the spending cap, she offered bold moves that will face scrutiny and public hearings in the coming months.

"This document outlines my spending priorities for the next two years, and it lays out a vision for Connecticut for the next 20 years - and beyond," Rell told lawmakers in the Hall of the House at the state Capitol. "It is a budget that invests in the generations - in this generation and in the generations to come. ... It is time for us to take action. No more easy promises. No more press releases. No more summits. Let's get it done."

No governor in state history has ever proposed what Rell did: a dramatic increase in education spending coupled with wide-ranging improvements in programs from early childhood to college. To pay for this, she is proposing to raise the state income tax by $3.4 billion over five years. The current maximum rate of 5 percent would increase to 5.5 percent over two years - a 10 percent increase.

This is the first time any Connecticut governor has proposed an income tax increase since it was created in 1991. Then-Gov. John G. Rowland signed an income tax increase to the current 5 percent, from 4.5 percent in 2003, but that came as part of a fiscal compromise and was never introduced in the type of speech Rell delivered Wednesday.

Like many Republicans, House Speaker James A. Amann questioned the need for a higher income tax.

"The big question here right now is: Do we really need all that revenue?" Amann said. "Do we need $1.3 billion in revenue?

"Maybe there is something there that I'm not seeing," the Democrat said. "But this is the head-scratcher of the day. If you do the math with the amount of money we have in the surplus and the amount of money we have in the rainy day fund, it just doesn't make sense."

Along with the income-tax increase, Rell reiterated a previous plan by proposing the phasing out of the estate tax currently paid by those who die with more than $2 million. Republicans, particularly in Fairfield County, have pushed for years to eliminate the tax. A similar plan to offer estate-tax relief fell apart last year, when Rell failed to reach a compromise with Democrats who wanted to create a state-earned income tax credit for the first time in Connecticut.

Those tax issues - often pitting the rich against the poor - will be back again this year as lawmakers struggle to craft the budget's final details before the session adjourns June 6.

In another repeat, Rell proposed to eliminate the car tax, but this year the plan includes a five-year phase-out. At the same time, Rell would eliminate the popular property tax credit that is currently a maximum of $500.

Rell is also trying again to increase the cigarette tax, a move rejected previously by Democrats. This time, she is pushing for the tax to increase to $2 per pack, up from the current $1.51. The state's rate, if approved by the legislature, would still be below the cigarette taxes in Rhode Island and New Jersey.

While students and educators were the big winners, there also were losers.

Unlike the Senate Democrats, Rell proposed no Medicaid increases for the state's often-struggling hospitals in a budget that will provide nearly $400 million to the hospitals in the next fiscal year. In the same way, she proposed no rate increases for nursing homes, which will receive about $1.4 billion next year.

Ron Cretaro, executive director of the Connecticut Association of Nonprofits, described the proposed budget as a "stunning setback for the tens of thousands of vulnerable Connecticut citizens who rely on nonprofit providers for the services they need and deserve." The nonprofits, which employ more than 20,000 people, are facing cost increases for health insurance, liability insurance, heating and transportation that will not be overcome by what Cretaro believes is inadequate funding.

Mayors and first selectmen, represented by the Connecticut Conference of Municipalities, applauded Rell's plans on education finance, property tax relief and smart growth.

"These initiatives, if collectively enacted, would be a grand slam for towns and cities," said James Finley, CCM's longtime lobbyist who was recently named the organization's executive director. "We commend the governor for her leadership."

The new budget is for the fiscal year that starts July 1. Rell is proposing a $17.5 billion spending plan for the first year, 6.7 percent more than current spending. In the second year, the budget would jump by another 4.7 percent to about $18.3 billion. The proposal, detailed in a 629-page document thicker than most telephone books, pays for everything from dental care for prison inmates to the salaries of more than 50,000 state employees.

Rell's proposals and speech turned the tables at the state Capitol as she received plaudits from Democrats and a seemingly tepid response from her fellow Republicans.

"To receive this kind of a budget from a Republican governor is unheard of," said Senate President Pro Tem Donald Williams.

Senate Republican Leader Louis DeLuca sat stoically for much of Rell's speech, applauding politely at times. He said that none of the 12 senators in his caucus had spoken favorably about Rell's proposed tax increases.

Only last week, DeLuca and his caucus members called a press conference to strongly support the state-mandated spending cap and to warn that Republicans would fight any attempts to break through the cap.

Still, DeLuca said he did not believe that Rell had undermined the GOP caucus.

"She's doing what she has to do, and we're doing what we think we have to do," DeLuca said. "I think the people agree with us. ... As it stands today, I doubt there would be any votes for" Rell's budget by Senate Republicans.


- Katie Melone

Current Budget: $640,152,703
Proposed Budget: $663,802,151
Employees: 6,865
February 8, 2007

Under Rell's proposal, Department of Correction inmate programs would largely be funded at or slightly below their current levels, but the agency would receive $4 million to implement the recommendations of a commission convened on prison overcrowding. The agency received only partial funding to achieve the recommendations in the current budget.

"What I take away is good news that there won't be a significant expansion to deal with the prison overcrowding problem," said Rep. Mike Lawlor, a co-chair of the judiciary committee. "We're not sending [inmates] out of state, not building a new prison."

Lawlor was also pleased the governor included money for prison diversionary programs in the budgets of other agencies, including the Department of Mental Health and Addiction Services. "In the good old days, you'd just try to build your way out of the problem," he said.

When asked for comment on Rell's proposal, DOC spokesman Brian Garnett said the agency was still analyzing it.

- Katie Melone

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- Colin Poitras

Current budget: $820 million
Proposed budget: $890.7 million
Employees: 3,546 Full-time
February 8, 2007

Teens struggling at home and young parents seeking assistance with day care would both benefit under Gov. Rell's proposed budget.

Rell is seeking $7 million over the next two years to create group homes and other support programs that would divert teenagers from juvenile detention centers if they are habitually truant, frequent runaways or out of control at home - the so-called status offenders.

To some degree it is something the state must do. A law taking effect Oct. 1 prohibits the state from placing teenage status offenders in juvenile detention halls.

Rell's budget plan would also increase funds for the state's Care4Kids child care subsidy program for lower-income working people from $71.2 million currently to about $90 million in fiscal 2007-08 and $93 million in fiscal 2008-09. The additional money could help an additional 800 children the first year, officials said.

The Department of Children and Families, which for several years led the budget parade with substantial infusions of cash to meet federal court-mandated standards of care, would receive relatively modest increases in the governor's budget.

But the increase Rell is seeking would go a long way toward resolving those federal mandates and get the agency out from under federal review, said the governor's budget czar, Robert L. Genuario, secretary of the Office of Policy and Management.

The compliance comes with a price. DCF's budget going into the 2009 fiscal year would top out at more than $900 million, up from $447.5 million in 2000.

While child advocates lauded Rell's investment in early childhood education, some felt her proposed Charter Oak Health Care plan didn't go far enough in helping struggling families and kids.

Families would be better served, said Sharon Langer, a senior policy fellow with Connecticut Voices for Children, if Rell raised eligibility limits for existing HUSKY health care programs and increased rates paid to private doctors so more of them would participate in programs helping poor people.

- Colin Poitras

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Higher Education

- Grace E. Merritt

Current budget: $644,479,247
Proposed budget: $683,939,044
Employees: 8,066
February 8, 2007

The governor has proposed a landmark $25 million more in college scholarships and about $95 million more for repairs and construction at community colleges and state universities.

The budget, a modest 2 percent increase in operating costs, extends the UConn 2000 construction project by a year to reduce bond debt.

State Rep. Roberta Willis, co-chairwoman of the legislature's higher education committee, said the unprecedented infusion of scholarship money will help make college more affordable and, in the long run, help keep students in Connecticut and train the future workforce. The money would provide $12.8 million in new aid for public colleges and $12.2 million for private colleges.

The budget also:

Provides $21.5 million each to Gateway Community College, which has campuses in New Haven and North Haven, and Southern Connecticut State University in New Haven; $5.1 million to complete construction work at Three Rivers Community College in Norwich; and $12.2 million for improvements at Central Connecticut State University in New Haven.

Reduces long-term debt of UConn 2000 construction by reducing bond amounts and extending the program to 2016. The program would still get the same amount of money, but the change would save an estimated $5 million to $15 million.

Eliminates UConn's fledgling Eminent Faculty program and the university's Center for Entrepreneurship programs.

- Grace E. Merritt

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Open Space

- Rinker Buck

February 8, 2007

In an attempt to address what environmentalists criticize as a serious shortfall in spending for open lands, Gov. Rell's new budget proposes spending an additional $37.5 million for conservation. But Republican and Democratic legislators say that even this appreciable increase may not meet the state's needs, and doubt that Rell's plan will produce the desired result.

From a high of $120 million in 2001, Connecticut's spending for conservation has steadily fallen, to $14.8 million last year.

Rell has proposed that the legislature authorize $37.5 million of state bond borrowing for conservation programs like farmland preservation. She has also proposed withholding state grants to towns that have failed to observe new "responsible growth" initiatives being developed by the DEP.

But there's often a vast difference between what the legislature authorizes in bonds and what the state actually allocates. In 2006, for example, the legislature authorized $8 million in general obligation bonds for farmland preservation, but the state ended up allocating only $1.9 million.

"I give the governor high marks for good intentions," said state Sen. Andrew Roraback, R-Goshen, who is pushing a bill to spend $100 million on conservation from the state's surplus. "But a commitment to authorize bonding doesn't always translate into release of those dollars, because the ratings services say they'll lower the state's credit rating if we spend that much."

- Rinker Buck

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- Joel Lang

Current Budget: $36 million
Proposed Budget: $38 million
Employees: 1,000 (approximate)
February 8, 2007

Gov. Rell's proposed environmental budget includes spending more to lower the state's dependency on fossil fuels and to keep sewage from flowing into Long Island Sound.

The budget would extend sales tax exemptions for hybrid vehicles and restore full funding for the Renewable Energy and Energy Conservation funds.

Increasing the energy funds to $35 million is "really significant," said Roger Smith of Clean Water Action, a group with a special focus on climate change.

"The less energy we use the better. Every bit of coal or oil we don't burn is less pollution," he said.

Long Island Sound and state rivers would be made cleaner by bonding $245 million in each of the next two years for sewage treatment projects under the state's Clean Water Fund. Funding for such projects had fallen to $100 million.

Curt Johnson, director of the Connecticut Fund for the Environment's Save the Sound program, said that the governor should be applauded for more than doubling the Clean Water fund, but that it needs to be doubled again to make rivers sewage-free by 2020 and revive the "dead zone" in the Sound's western end by 2014.

He said 2 billion gallons of raw sewage enter the Sound each year.

- Joel Lang

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Social Services

- Ann Marie Somma

Current budget: $4.52 billion
Proposed budget: $4.73 billion
Employees: 1,760
February 8, 2007

A key element of Gov. Rell's proposed social services budget is a health care initiative to make sure that Connecticut children do not go uninsured. It calls for $8 million to expand the state's HUSKY health care benefits.

Under the plan, newborns at hospitals would receive health care benefits. The state would waive the premium for two months.

State officials estimate every month 90 newborns leave state hospitals without insurance.

The plan would also require schools to inquire about a student's health care plan at the start of every school year.

"The governor has put forth aggressive initiatives to address the problems of the uninsured in the state," said Michael P. Starkowski, commissioner of state Department of Social Services.

Health care advocates praised Rell for joining the debate to reform the state's health care system, but questioned whether her plans are sustainable and affordable.

"There are other plans out there that would save the state more money," said Rhona Cohen, the director of the Hartford-based Health Care For All.

- Ann Marie Somma

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- William Hathaway

February 8, 2007

The governor's proposal to expand health care access to the uninsured will compete against other proposals circulating in the legislature.

Working with private insurers, the state would develop a basic health insurance product that would cost consumers about $250 a month, including prescription drugs, under Gov. M. Jodi Rell's plan.

The state's price tag, which rises to $45 million a year before leveling out in 2010, is one of the more affordable ways to shrink the number of uninsured, state budget officials said.

But some Democratic leaders say the cost to consumers of the insurance plans will be higher than estimated. They also say it makes no sense to expand the health insurance pool without increasing state contributions for reimbursements under Medicaid, the government insurance program for the poor. The governor's budget calls for a 2 percent increase in reimbursements to Medicaid managed care companies, which could be used to increase payment to doctors and dentists.

However, critics say more money is needed because doctors often do not take Medicaid patients because the cost of providing care is often greater than their payments.

Hospital officials are also lobbying hard for an increase in Medicaid reimbursements, arguing that the government has simply shifted the cost of caring for the state's poorest residents to urban hospitals.

- William Hathaway

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Arts & Culture

- Frank Rizzo

Current budget: $25,590,378
Proposed budget: $26,330,151
Positions: 44
February 8, 2007

The Governor Giveth: Rell proposes a new Cultural Treasures Account that would come from the state's cable tax revenues. A total of $5 million is budgeted for fiscal '08 and $10 million for '09 and every year after that.

The commission would allocate grants from this fund, with 60 percent going to arts and culture nonprofits that have annual operating budgets greater than $1 million, and 40 percent would go to groups with annual budgets of less than $1 million.

The Governor Taketh Away: The new budget eliminates $8.5 million - or all mandated funding for 16 organizations and attractions. For example, the Stamford Center for the Arts loses $1.2 million; New Haven's International Festival of Arts & Ideas loses $1 million; Greater Hartford Arts Council loses $100,000; and Hartford's Twain/Stowe houses lose $120,000.

Instead, the governor proposes a one-time-only $5 million infusion from the '07 surplus. That leaves a net cut of $3.5 million for the 16. Presumably, some of the lost funding would come from the new Cultural Treasures Account.

- Frank Rizzo

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Motor Vehicles

- Katie Melone

Current budget: $69,504,274
Proposed budget: $73,531,566
Employees: 760 full-time (approximate)
February 8, 2007

The governor's proposed 5.8 percent increase calls for the agency to hire additional inspectors and personnel to implement federal safety requirements, staff that agency officials say is much needed to enhance safety.

As part of a plan to consolidate truck inspections, Gov. M. Jodi Rell is proposing transferring 11 Department of Public Safety weigh station technicians to the DMV, which will, in theory, free up inspectors at those stations to travel more around the state.

"It lets our people specialize and focus in an area and allows our people to make both weight and safety inspections," said DMV Commissioner Robert Ward.

The governor is also proposing spending $17 million on a technology overhaul estimated to cost $52 million. Ward said improved technology would help ensure proper background checks on school bus driver applicants, an area where lapses were exposed in late 2006 after a fatal bus accident in West Hartford.

"Anytime you're going to get the technology all on the same page it's got to be of tremendous value to the organization," said William Moore, the executive director of the Connecticut School Transportation Association.

- Katie Melone

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Public Safety

- Tracy Gordon Fox

Current budget: $167.8 million,
Proposed budget: $168.9 million
Employees: 1,203 sworn troopers and 516 civilian
February 8, 2007

No one disagrees with Gov. M. Jodi Rell that there needs to be more troopers on the road. But many troopers and state leaders don't agree with how she proposes to do it.

Rell's spending plan for the Department of Public Safety calls for pulling 13 of the 16 troopers from their assignments at homeland security and putting them back on the road. She would replace them with civilians, not police officers, to carry out jobs such as monitoring crucial infrastructures, including ports, freight trains and ferry boats.

Rell also wants to remove the 21 troopers assigned to truck weigh stations and assign them to more traditional police duties. Her plan would put 34 more troopers on the road, in the short run, along with those who graduate from two training classes in 2008.

State police Union President Steven Rief and Rep. Stephen Dargan, D-West Haven, co-chairman of the public safety committee, questioned the reassignments, saying that what is needed is a commitment to raising the staffing level, not cutting from critical units.

"To diminish our roles in those capacities is a mistake. It's almost unheard of in the aftermath of 9/11," Rief said.

Dargan said he is proposing a bill that would increase the number of troopers to 1,500, which would require more than two new classes in 2008.

"We can't just decimate those units," Dargan said.

- Tracy Gordon Fox

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- Gary Libow

Current budget: $459.5 million
Proposed budget: $495.6 million
Employees: 3,300
February 8, 2007

"Bold" is how Commissioner Ralph Carpenter describes the governor's plan to fund mass transit upgrades to siphon drivers off congested I-95.

Gov. M. Jodi Rell proposed initiating weekend service on Shore Line East with eight round trips daily on the New Haven to Old Saybrook line. She also supports funding added weekday trips during middays and evenings. DOT envisions eventually expanding service to New London.

Rell's budget plan seeks the purchase of 12 additional electric rail cars for Shore Line East, and funds rail station and parking improvements in Branford, Clinton, Madison, Guilford and Westbrook.

"It really is a great day for transportation," Carpenter said. "Shore Line East has a tremendous amount of support, with ridership up 8 percent last year."

To help pay for mass transit initiatives, the governor proposed increasing bus fares Oct. 1 for single zone riders from $1.25 to $1.50. Rell projects the fare hike will generate $4.4 million in fiscal 2008.

DOT is also interested in leasing naming rights to rail and bus facilities as a revenue source.

Carpenter is also pleased Rell proposed spending $35 million for a new parking garage at the Stamford rail station, and $20 million each year of the biennium to hasten priority bridge repair and rehabilitation projects.

Rell proposed hiring an additional 200 DOT employees, including 75 engineers and 81 inspectors.

- Gary Libow

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- Mark Peters

February 8, 2007

Like everyone else, business executives and lobbyists closely followed the marquee items - health care, education and energy. But within the governor's budget were pockets of new programs and cuts that would affect them exclusively.

The eligibility requirements would tighten for film, TV and other productions applying for corporate tax credits. Beginning last July, they could get a 30 percent tax credit for money spent in-state on goods, services and labor. The new requirements would limit the tax credits to production spending over $250,000 and put a $5 million cap on eligible salaries.

Expansion of the Job Creation Tax Credit program, including a reduction in the number of jobs that need to be created, an increase in the maximum credit and eligibility for companies already in state.

Southeastern Connecticut would receive state economic development dollars, including a $10 million revolving loan fund to diversify the region's economy.

An additional $35 million in borrowing to fund loans for economic development projects, and the elimination of select state programs including one that provides micro loans.

The budget pays for the continued phase-out of the property tax on business equipment.

Seeing that money in the budget was important for Frank Johnson, president of the Manufacturing Alliance of Connecticut. Right now, states around Connecticut don't have a similar tax, causing some manufacturers to look to Massachusetts or Rhode Island for expansion.

"That is a real competitive disadvantage," he said.

- Mark Peters

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Reprinted with permission of the Hartford Courant. To view other stories on this topic, search the Hartford Courant Archives at http://www.courant.com/archives.
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