Finance Package Falls About $360M Short of Closing Budget Deficit

Finance Package Falls About $360M Short of Closing Budget Deficit

CT News Junkie, April 8, 2016

by Christine Stuart

The legislature’s Finance, Revenue, and Bonding Committee approved—by a 30-21 party line vote—a tax package that increases revenues by about $10 million above yesterday’s Appropriations Committee spending plan. That means the 2017 budget is still in the hole by nearly $360 million.

Rep. Jeffrey Berger, D-Waterbury, who co-chairs the committee, echoed remarks made Wednesday by the Appropriations Committee co-chairs, explaining they based their numbers on the January revenue estimates Gov. Dannel P. Malloy used to build his budget.

Since that time revenues have plummeted and created an estimated $930 million budget deficit, according to Neil Ayers, director of the Office of Fiscal Analysis. Berger said he expects revenue to do “better in April” even though they will still be below projections used to build the original budget. But Berger said filling the hole with new taxes or tax increases isn’t going to work this year. “Over the last two budgets we’ve had something like a $2.6 billion tax increase,” Berger said. “It hasn’t worked. We’re still regressing in our income tax revenues.”

He said more taxation isn’t necessarily the solution. He said the state needs to boost its economy. He said the package the committee will vote on Thursday reflects those ideas. Since both budget-writing committees fell short of closing the deficit, Malloy said he will release a new budget next week that takes the entire deficit into consideration.

“New burdens on small businesses and sweeps of critical energy and environmental funding are not the answer,” Devon Puglia, a spokesman for Malloy, said Thursday. “This year, we need to do things differently. The governor will put out a budget next week that does exactly that.”

The Finance, Revenue, and Bonding Committee package raises $24 million from a proposal that requires all retailers pay $100 to $350 to renew their sales tax permits every two years, rather than every five as current law requires. The second biggest revenue increase include diverting $20 million from the Regional Greenhouse Gas Initiative to the general fund.

Rep. Chris Davis, R-East Windsor, said by diverting those funds the state is telling its residents and businesses that it’s okay for you to pay higher electricity rates for these environmental initiatives and the state is just going to take it and put it in the general fund. “I think it sends a bad message,” Davis said. Berger said taking the money doesn’t hinder the state from participating in the regional program and doing what it needs to do to keep greenhouse gas initiatives to a minimum.

The package also repeals the sales tax on coin operated car washes, and eliminates the state admissions tax on tickets to concerts and sporting events. Under the elimination of the admissions tax, the state would allow a municipality by a vote of its local board to approve a local admissions tax up to 10 percent on certain venues.

The tax package also seeks to regulate fantasy sports. It assumes the state will be able to collect $9.5 million from fantasy sports operators by establishing an 8.75 percent surcharge on entry fees collected by companies like DraftKings and Fan Duel. But Griffin Finan, director of Public Affairs for DraftKings, said the taxing scheme Connecticut wants to implement is different than what’s been implemented in other states. “We are opposed to a tax on our customers’ entry fees,” Finan said. “This is not the time for a new tax on the fantasy sports fans in Connecticut.” DraftKings has supported legislation in other states that taxes the fee it takes at the end of the transaction.

The bill also exempts fantasy sports from being defined as gambling in order to avoid a conflict with the state’s compact with the two tribal casinos, but questions about whether that goes far enough remain. “We haven’t weighed in publicly, but we are assessing its potential impact,” Jaclyn Falkowski, a spokeswoman for Attorney General George Jepsen, said.

Revenue Package back to top

The total package the Finance Committee approved Thursday reduces revenue $61.5 million and increases revenues about $80.9 million.

Davis said he thinks revenues have continued to slide, but that the problem should be taken care of on the spending side. Sen. John Fonfara, D-Hartford, pointed out that Davis could offer an amendment to make up the more than $300 million difference, but Davis declined. “I do not see this as a revenue problem,” Davis said. “I see this as a spending problem.”

Rep. Vincent Candelora, R-North Branford, pointed out that because of the discrepancy in the numbers it’s likely negotiations over what will or won’t be in the budget will go behind closed doors where rank-and-file lawmakers won’t have a say. “I think this institution does its best work when it’s open and transparent,” Candelora said.

He said the last-minute tax package put together behind closed doors last year caused General Electric to leave the state of Connecticut and other large employers to express concern. “This is not a plan or a solution,” Senate Minority Leader Len Fasano and Senate Minority Leader Pro Tempore Kevin Witkos, said. “It is an unworkable disjointed effort that still leaves our state with a massive shortfall.”