Whey Finance

Democrats, Governor Lamont open frictional talks over spending surplus dollars

HARTFORD — After an initial negotiating session between majority Democrats and Governor Ned Lamont’s staff, there appear to be at least a few points of contention that need to be clarified if the General Assembly is to approve a new budget and adjourn on time at midnight. May 4.

House Democrats want to create a new $600 credit for low- and middle-income families with children in 2024. Lamont is sticking with his $363 million tax cut plan, centered on increasing the credit for state property tax.

They disagree on the possible use of additional tax revenue beyond mandatory debt reduction. Senate Democrats want to redirect some of the extra revenue to major new investments in preschool, which Lamont opposes.

Speaker of the House Matt Ritter, House Majority Leader Jason Rojas, and a top senator on the finance committee tasked with drafting taxes highlighted those potential conflicts on Wednesday, noting that if he doesn’t With only three weeks left in the budget adjustment session of the legislature, they are confident that compromises can be found, along with dozens of other priority pieces of legislation.

“He was never a big fan of the child tax credit,” Ritter, D-Hartford, told reporters of Lamont’s position. “While in our caucus it’s possibly the most popular thing that’s come up in the last two years. So it’s going to have to work out. I fully support the credit. I think it makes a lot of sense. It has been very effective during the pandemic. This is an issue that I believe requires negotiation.

A 2017 law, called the volatility cap, limits lawmakers to spending only 99% of the revenue that can be spent in a fiscal year, which will increase over the next few years to 98%, where it will remain. That could be around $320 million in the fiscal year ending June 30.

But Lamont believes spending it on anything other than long-term debt reduction is an unacceptable way to dodge the state’s mandatory spending cap.

Surpluses in the pandemic, the emergency reserves – sometimes called the Rainy Day Fund – remained at a maximum of $3.15 billion, while hundreds of millions of dollars were transferred to pension funds.

Sen. John Fonfara, D-Hartford, longtime co-chairman of the Finance Committee, said in an interview that he thinks the best way to invest extra state money during a time of surplus income was to help underprivileged children in their preschool years.

“Right now that fund is $320 million,” Fonfara said in an interview in his Capitol office. “It will hit $500 (million), $600 million by the end of the decade. Here it’s only 2022-23 and we’re at $24 billion (state budget), so to get to $30 billion, two percent of that is $600 million. So I said let’s redirect that. We’ll figure out how to do it where it wouldn’t interfere with the spending cap. Let’s invest in the kids who go far behind and never catch up. Where most children start kindergarten ready, these children do not and throughout their lives many of them remain behind.

He said early investments in children made more sense than paying off long-term obligations such as public pensions. “Hopefully we can convince the governor to see this,” Fonfara said. “I understand it’s an election year and it’s easy for someone to say, ‘Oh, you’re going back on your promises to invest those dollars to pay down the debt.’ I think we can do both.

“There’s probably enough income for you to do tax cuts,” Ritter said. “You can’t break the spending caps and no one is trying to do that. There are rules of the road and we plan to follow them. State fiscal analysts forecast a surplus of nearly $1.8 billion in the budget through June 30.

“Right now we have a large rainy day fund and we’re seeing surpluses,” said Rojas, D-East Hartford, former finance committee chair. “A lot of it comes from this kind of very volatile period in our economic history, and we want to be sure that in the long term, we’re not making commitments right now that we can’t deliver over time. future. That also seems to be on the governor’s mind.

“Five years ago, all we would have ever talked about was our long-term debt,” Rojas said. “Now that there is a lot of money available, no one is talking about long-term debt, but we should continue to pay down this debt because it will allow us to free up additional income in the operating budget, but also to address which has been a very long-term question, which is probably not a priority for the average taxpayer, like where the tax cuts are, but I think for all of us, as policy makers who have been around for very long, we cannot lose sight of these long-term debts that we have.

On another point that came up during initial discussions on Tuesday, a Lamont-proposed local car tax rate reduction bill that was adjusted last week by the budget-drafting appropriations committee has a higher threshold rate.

Ritter, D-Hartford, said on the spending side, the $2.1 billion budget that goes into effect July 1 appears to be going well. “Looks like they might have to compromise on the car tax to go with the appropriations budget,” Ritter told reporters ahead of Wednesday’s House session. Lamont proposed a statewide mill rate of 29 — a tax of $29 on every $1,000 of value — while the committee approved a rate of 32.46.

Ritter said he believed Lamont’s team seemed willing to head for the 32.46 rate. Ritter said that in his city, if that rate per mile is approved, local car tax bills mailed in June could be 12 mills lower than January. “It’s an absolute, clear signal of a tax cut for people,” Ritter said. “I think it will be very helpful and gladly received. It is inherently unfair that a Toyota in East Hartford costs more than in a lower rate town.

Lamont, speaking to a few reporters after an independent event outside the Capitol on Wednesday afternoon, said his proposed mill rate of 29 would mean more communities could have lower tax rates for personal motor vehicles.

“The Apps version kind of followed our lead and came close,” Lamont said. “You know, we’re going to get a car tax cut. Look, I like our version. Our version includes many more cities and provides greater tax reduction for people. Now you sit down and negotiate around a table.

[email protected] Twitter: @KenDixonCT