Malloy Warns Locals

In remarks to the Council of Small Towns, Governor Malloy again suggested everyone will have to play a role in the balancing of the state budget this year. And that means anyone receiving state financial support will likely see reductions. On the other hand, Malloy also told town leaders they will like proposals he will roll out next month concerning mandate relief.

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Reason to Hope?

Comptroller Kevin Lembo, speaking in Hartford, says he sees signs that the economy is strengthening and that may help produce more tax revenue for the state of Connecticut in the coming months. He added he sees no trends that would lead to the elimination of projected budget deficits over the next two years, but said the signs are hopeful.

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Malloy Prepares

It is becoming quite obvious that Governor Malloy intends to present a budget proposal in four weeks that will be drafted based more on making the numbers work than any political considerations. The state's fiscal health has reached a point where there is really no alternative.

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Support for Union Concessions

The influential Hartford Business Journal is urging lawmakers to seek and support concessions from state employee unions as one way to balance the state budget.

More important, is the paper's larger point in an editorial published this week. The HBJ says its reason for supporting concessions is the need to avoid other cuts or tax increases that will have a negative effect on Connecticut's economic climate. This observation is a sign that the legislature is still operating in a political atmosphere that favors a "do no harm" approach on economic policy.

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Malloy Setting Table

Governor Malloy is clearly setting the table for the upcoming legislative session, but the question remains; will the legislature respond and can it respond effectively when it is so narrowly divided along partisan lines?

In this State of the State address, Malloy made clear he intends to offer a budget next month that will attack Connecticut's chronic fiscal crisis in three ways: More efficient spending, labor concessions, and reductions in municipal aid - particularly to wealthy towns.

Malloy's stated goal is consistent with policy recommendations made by the Connecticut Institute for the 21st Century. Connecticut taxpayers and businesses deserve and expect sound, predictable public policy from their state government. CT21 has argued this is the only way to build a strong economy with the potential for long term growth.

Jitters - Hartford Courant

Malloy Warns - CT Mirror

Malloy Asks Labor - CT News Junkie

Malloy Describes Lean Budget

One month before he is due to present his budget proposal to the legislature, Governor Dannel Malloy drew some broad outlines for his policy goals in 2017, during his State of the State address.

Malloy said the new budget must focus on creating a leaner government that is built around priority based spending. He told lawmakers we can only spend the money we have and that makes for difficult choices. He also urged lawmakers to work with him on reforming two major areas of state spending: State employee pensions and municipal aid.

The priority based spending model is consistent with the approach suggested often in recent years by the Connecticut Institute for the 21st Century.

Text of Governor Malloy's Address

Session Opens

Today’s State of the State address from Governor Dannel Malloy may reveal the first hints of the policy agenda at the state capitol for 2017.

With narrow partisan margins in both the House and Senate, and a looming budget deficit, there is reason to expect a slow moving or even paralyzed process. There are only hard choices to be made this year as Connecticut faces potential budget shortfalls - over the next two years - of $3 billion or more.

Governor Malloy has three basic choices from a leadership perspective. He can put his best budget proposal on the table and then leave hard decisions in the hands of the legislature. He can propose a traditional Democratic policy approach and hope the Democratic leadership can secure the votes to pass it. Finally, he can take a more conservative approach to the state’s budget challenges in the hope he can force moderates on both sides of the aisle to come together to form a bi-partisan majority.

As is always the case, there are many options in between. Today’s speech will only give hints of what is to come, because Malloy is not due to unveil his specific budget proposals until next month.

It does seem clear that the results of the recent legislative elections, and disappointment in the business community over decisions made during the last two sessions of the legislature, are still having an impact on the tone of the debate and policy priorities. The legislature remains extremely sensitive about moving forward on any issue that might be perceived as having a negative effect on the state’s economy or business climate.

More Preview Analysis:

Is Connecticut Broken - Hartford Courant

What to Know - CT Mirror

Unscripted 2017 - CT News Junkie

 

An Important Session

A closely divided legislature facing an unprecedented budget crisis could make the 2017 session of the General Assembly one of the most important in recent Connecticut history.

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Lembo Urges Support for Union Deal

Comptroller Kevin Lembo is urging lawmakers to approve a deal worked out between state employee unions and the Malloy administration over pension costs.

He argues now is not the time for partisan warfare over the issue.

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Power Deal

After more than a month of negotiation, Democrats and Republicans have come to agreement on how the state Senate will be managed with both sides holding 18 seats.

The final deal could have an impact on policy debate in the upcoming session; slowing the progress of certain legislation and perhaps pulling the discussion toward the center.

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Major Budget Cuts

Buried at the end of a routine story on this month's Connecticut budget projections is a big hint about the nature of the debate over state spending that will commence in two weeks at the start of the legislative session.

"[Governor]Malloy already has warned legislators he will not propose any major tax increases to help balance the books, meaning he also will recommend deep spending cuts," as reported by the CT Mirror.

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An All Options Budget

With the state facing combined budget shortfalls in each of the next two years totaling approximately $3 billion, all options must be on the table, according to the governor's office and top lawmakers.

That's the assessment of a Hartford Business Journal analysis, less than three weeks before the start of the next session. While all parties seek to avoid tax increases, most at the capitol acknowledge it will be difficult to balance the budget without at least some changes to the tax code.

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Jobless Rate Down

The week ends with some good news on the economic front. Connecticut's jobless rate fell to 4.7%.

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No Spending Cap Deal

The commission on the state spending cap was unable this week to reach a full agreement on the terms of the cap and which spending items should fall outside the cap.

As the legislature faces a two-year budget cycle nearly $3 billion short, the 25 year fight over the spending cap - what it means and what it should do - illustrates how difficult it is to change bad spending habits, even when everyone knows changes must be made.

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Support for Labor Deal

Governor Malloy is winning conditional support from some state business leaders for the agreement announced last week on pension payments for state employees.

At a MetroHartford Alliance breakfast, the deal was described as a step in the right direction. Meanwhile, Republican lawmakers say the deal only goes so far and ignores the fundamental changes necessary in current state labor contracts.

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Pension Deal

In an effort to relieve pressure on the budget, Governor Malloy has come to an agreement with state employee labor unions to stretch out pension payments over the next twenty years.

The deal needs legislative approval. There are concerns the agreement may lead to higher costs over a longer period of time, but in the current fiscal environment the opportunity for immediate relief may be too good to pass up.

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Regionalism or Crisis

Hartford Mayor Luke Bronin is speaking increasingly about his city's financial challenges and how they may effect the state as a whole if not addressed.

Speaking in West Hartford Tuesday night, Bronin warned that if his city is forced to declare bankruptcy the effects on the state will far exceed the blow that followed the departure of General Electric's headquarters from Fairfield county. Bronin's solution - which is largely undefined - depends on a regional approach.

The Hartford issue is just one more layer on top of an already burdened state budget.

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Lesson from Ol' Miss

In case you missed it, the CBS program 60 Minutes had an interesting story this past Sunday on Mississippi's efforts to lure manufacturing to the state. While the lessons are not fully analogous to Connecticut, we can certainly learn something from the determination it takes to achieve an economic development goal.

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Lembo Straight Talk

Echoing themes long promoted by CT21, state Comptroller Kevin Lembo told a business group in Norwalk last week that the state needs to get out of crisis management mode when it comes to budgeting and to re-think everything we do.

Lembo's audience appeared to be in general agreement with the direction, but seemed unconvinced anyone at the state capitol is hearing the message.

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Negative Outlook

One of the nation's leading bond rating agencies is down grading its outlook for Connecticut from stable to negative.

S&P Global Ratings says Connecticut's fixed costs are rising at levels that may not be sustainable. The news follows two presentations done earlier this week by government budget experts before the budget and finance committees.

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Halcyon Days Over

According to the Hartford Courant, legislators at the Capitol now agree the Halcyon days of state budgeting are over and there are few good choices left.

Lawmakers got a briefing on the budget situation Wednesday from members of the Malloy administration who now say the state could be as much as $1.5 billion short in the budget that begins in July of next year unless major changes are made.

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$1.5B

Just a few days after twin reports pegged the state's potential budget deficit next year at $1.3 billion, a new report puts the number at $1.5 billion with the potential for a $1.6 billion shortfall in the following year.

The numbers represent about 8% of the General Fund budget meaning lawmakers will have little choice but to dedicate all their efforts to closing the gap in the next eight months.

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Perhaps as troubling, is the sense that state agency leaders are offering little that is new in ways to reduce spending. Budget options presented to the governor for consideration include the typical list of "Washington Monument cuts," that would reduce services for the state's most vulnerable citizens and end small budget items like rifle salutes at veterans' funerals.

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$1.3 Billion

As expected, new reports suggest the incoming legislature will need to close a $1.3 billion gap in the next state budget. With this news as a backdrop, Governor Malloy is signaling his own budget proposal will not "lead with" new tax increases and may even include tax breaks designed to make Connecticut more business friendly.

Taking Budget Toll - CT Mirror

Budget Woes - CT News Junkie

Time Indeed!

The Hartford Business Journal editorializes this week about the need to turn the focus at the state capitol away from the election and toward solutions to help the state's economy.

The influential journal says the outcome of the legislative elections - divided government - is a good thing.

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