Transcript Slide 1

STATE OF CONNECTICUT
2009, 2010, 2011 Budget Issues
April 30, 2009
Legislature’s Budget Process
(Governor Proposes, Legislature Decides)
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Connecticut Has a Biennial Budget
Governor Submits Budget to Legislature in Odd Numbered Years
Appropriations Committee Holds Hearings for Each State Agency
Subcommittees Review Budget Information
Subcommittees Report to the Appropriations Chairmen
Appropriations Chairmen Prepare Budget Recommendations
Budget Report Submitted to Full Appropriations Committee and Voted
Upon
Finance Committee Produces Revenue Estimates and Capital Budget
Bills
Appropriations and Finance Bills Submitted to House and Senate
Alternative Budgets May Be Presented by Minority Party
Legislative Leaders and Governor Negotiate Budget
House and Senate Debate and Adopt
Governor’s Signature or Veto (Returned to Legislature)
The Spending Cap
History
• Legislature Passes Income Tax and Spending Limit/Cap in 1991
• Voters Approve by 4 to 1 a Constitutional Amendment to Limit State
Spending in 1992 – Yet to Be Implemented by 3/5 Vote of House and Senate
Key Features of the Cap
• Calculated From Previous Year’s Base (Total Appropriated Funds)
• Growth=Base Year Multiplied by 5-Year Rolling Average Income Growth
(or Prior Year’s Inflation Rate, Whichever is Greater)
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Excluded: Debt Payments, Grants to Distressed Municipalities and Federal
Mandates and Court Orders (1st Year Only)
Exceeding the Spending Cap
• Governor is Required to Issue a Declaration of Extraordinary Circumstances
or Emergency
• Legislature along with the Governor Determines What Spending in Excess of
the Cap Will Be Included or Excluded in the Base for Future Calculations
• Legislature Must Approve Additional Spending by a 3/5 Majority. (91
Votes in the House and 22 Votes in the Senate)
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FY 09 General Fund Revenue
Special Transportation Fund Not Included - $1.04 billion
Total = $16,537.3 million
Other Taxes, $562.1 3.4%
Gambling, $665.2 4.0%
Other Revenue,
$697.6 4.2%
Cigarette Tax, $325.0 2.0%
Income Tax,
$6,674.0 40.4%
Federal Grants,
$3,141.3 19.0%
Oil Companies Tax,
$81.4
0.5%
Corporate and Business
Taxes, $1,010.7 6.1%
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Sales and Use Tax,
$3,380.0 20.4%
Data Source: Office of Fiscal Analysis
Major Budget Components for FY09
(In Millions)
Legislative $76.0 0.4%
Fringe Benefits
$1,871.2
Other Misc.
$239.4
(PILOT Grants, Workers’ Comp.,
Reserve for Salary Adjustment)
10.2%
1.3%
General Govt. $607.8 3.3%
Regulation & Protection $377.3 2.1%
(DPS, Banking, Insurance, & others)
Conservation & Development $108.7 0.6%
(DEP, DECD, Tourism, & others)
Health & Hospitals $1,686.5 9.2%
(DPH, DDS, DMHAS, & others)
Transportation $506.4 2.8%
Debt Service $1,966.9
10.7%
Judicial $553.1 3.0%
Corrections $1,599.7
Education
ECS Grants
Higher Ed.
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8.7%
$3,809.8
$1,889.2
$747.7
20.8%
10.3%
4.1%
Human Services
$4,950.4 27.0%
Medicaid
$3,763.8 20.1%
SAGA
$182.4 1.0%
Temp. Assist. To Families $112.0 0.6%
Slide provided by the Office of Fiscal Analysis
CT Income Tax Paid
(2007 Income Year)
Non-Fairfield County
$2,860,778,549
Fairfield County
$2,513,726,828
53.2%
46.8%
895,000 residents
Grand Total Paid by 3.4 million State Residents = $5,374,505,377
Source: Connecticut Department Of Revenue Services
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Town Comparison
and Return on Revenue
(Income Year 2007)
Municipality
State Aid To Municipality
Income Tax Paid Sales and Use Tax PaidTotal State Taxes Paid
Difference
Direct Return
(Fiscal Year 2007)
(Income Year 2007)
(Income Year 2007)
(SUT + Income Tax)
(Aid Received - Taxes Paid)
(on Investment)
Bethel
$9,160,525
$21,653,195
$7,426,452
$29,079,647
($19,919,122)
$0.32
New Canaan
$2,282,746
$185,884,428
$10,073,631
$195,958,059
($193,675,313)
$0.01
Redding
$1,004,861
$33,723,191
$1,809,143
$35,532,334
($34,527,473)
$0.03
Ridgefield
$3,351,116
$82,838,621
$14,987,564
$97,826,185
($94,475,069)
$0.03
Weston
$1,654,904
$66,341,389
$1,375,491
$67,716,880
($66,061,976)
$0.02
Westport
$2,929,232
$174,016,718
$47,316,407
$221,333,125
($218,403,893)
$0.01
Wilton
$3,394,519
$89,185,640
$18,550,262
$107,735,902
($104,341,383)
$0.03
Bridgeport
$183,398,650
$48,583,289
$51,996,592
$100,579,881
$82,818,769
$1.82
Hartford
$229,972,958
$41,620,266
$119,483,249
$161,103,515
$68,869,443
$1.43
New Haven
$179,792,547
$65,671,290
$130,074,116
$195,745,406
($15,952,859)
$0.92
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State revenues reflect previous 12 month economic activity
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FY 09 Tax Revenue Drop-Off
$1.8 Billion Loss
$13,000.0
$12,600.0
$12,971.1
$12,569.2
$12,694.4
$12,374.0
$12,573.7
$12,419.0
$12,200.0
$11,800.0
$11,533.1
$11,460.0
$11,400.0
$11,191.5
$11,000.0
Budgeted
Revenue
(June
2007)
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Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
- $944 million current deficit
Data Source: OPM monthly letter to the State Comptroller
Mar-09
General Fund Budget Projections
FY 09 through FY 12
As of February 2, 2009
(in millions)
» FY 2009
FY 2010
FY2011
FY 2012
• Revenue
15,608
14,551
14,787
15,657
• Expense
16,961
18,519
19,500
20,479
• Deficit
(1,353)
(3,068)
(4,713)
(4,822)
• % of Budget
9
8%
21%
24%
24%
Spending Increases
(In Millions)
FY 03
FY 09
%
Increase
Medicaid
$2,703
$3,764
39.3%
State Employee Salaries
$2,211
$3,187
44.1%
Education Cost Sharing (ECS)
$1,515
$1,889
24.7%
Debt Service
$1,396
$1,967
40.9%
Health Care - Retired State
Employees
$240
$484
101.7%
Health Care - State Employees
$288
$500
73.6%
State Employee Pensions
$286
$504
76.2%
Total Inflation (Avg. Rate of
Inflation 2003-2009 is 2.9%)
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Data Source: Office of Fiscal Analysis
U.S. Bureau of Labor Statistics
18.7%
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Shortfall
Proposed Rainy Day Fund
$135.3
$281.7
Potential Rainy Day Fund Exposure
$417.0
Uncertain Measures
$300.1
Total Potential Rainy Day Fund Exposure
$717.1
“State government does not need to tighten its
belt. It needs to go on a permanent diet in
order to sustain a longer life.”
~ Nick Perna CT Economist
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Governor Rell’s FY 2010-2011
Budget Proposal
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No Tax Increases
Maintain Current Funding to Towns
Eliminate and Consolidate State Agencies and Commissions
Cancel a Significant Amount of Pending State Bonding
Seek Concessions from State Employee Unions
Eliminate Many Existing and Vacant State Employee Positions
Financial Incentives to Towns that Voluntarily Regionalize Services
Require 2/3rds Vote to Impose New, Costly Mandates
Delay In-School Suspension & “Raise-the-Age” Mandates
Suspend Binding Arbitration for Towns for 2 Years
82% of CT Residents Agree: it is time to shrink the size
of state government
(Quinnipiac Poll 2/10/09)
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Democrat 2010-2011
$3.3 Billion Tax Increase Proposal
Increase in Taxes:
•New tiered income tax brackets increase up to 7.95%
•30% Additional Surcharge on the Corporation Tax
•30% Additional Surcharge on Estate and Gift Tax
•Eliminates the Property Tax Credit
•Sales Tax on Clothing
•Elimination of more than 50 Sales Tax Exemptions
Other:
•No Consolidations and Eliminations of State Agencies or Commissions
•Accepts some of the Governor’s Spending Cuts
•Borrows to pay Debt and uses all of our Rainy Day Funds
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Republican FY 2010-2011
No Tax Increase Budget Proposal
Budget Priorities:
•No Tax Increases
•Freezes State Employee Wages for 18 months
•Requires 6 annual furlough days
•Raises State employee medical co-pays:
Generic Rx Drugs
Name Brand Rx Drugs
Doctor Visits
Current
$3
$6
$10
Proposed
$6
$20
$30
•Outsources some Social Services
•Levels funding for Schools and Towns
•Provides some relief from State Mandates
In addition to consolidations suggested by the Governor, Republican’s Propose:
•Consolidating state agencies from 23-6
•Impose a hard hiring freeze of state employees
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Governor & Union Concessions (4/24/09)
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RIP: (Retirement Incentive Program) If you're otherwise eligible to retire, the RIP
adds 3 years of credit.
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Three-tiered prescription drug co-pays to: $5, $10, $25.
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Health care premiums increased by $350 per year.
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"Preferred Plan" closed to future retirees.
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Retirement age/years of service stays the same for those directly transitioning from
state employment to retirement (55 with 10 years of service).
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Anyone with less than 5 years of service will now pay 3% of their salaries to a retiree
health care fund until they have 10 years of service.
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State may choose to self-insure.
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Defers $14.5 million FY09 payment to OPEB liability, and reduces SERS payments by
$50 million this year, $64.5 million in FY 10.
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No layoffs through 6/30/11.
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Wage freeze for FY 10.
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7 furlough days between now and expiration of the biennium.
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Triggers for further negotiations if revenues are $300 million or more below
adopted budget.
Tax Policy Drives Connecticut’s Economy
Income Tax Enacted in 1991
•State and Local and Tax Burden-Connecticut ranked 24th in 1977, 18th in 1991, jumped to
5th in 1992, and has been in the top 3 since 1995 (State Income Tax Enacted in 1991)
•If you add the Federal Tax Burden, Connecticut ranks #1
•Connecticut’s Tax Freedom Day is April 30th- the latest in the country
• Connecticut’s Population Changes:
•1980-1990
+ 5.6%
•1990-1995
0.0%
•1995-2000
+3.6%
•2000-2005
+2.6%
•2005-2007
+0.45%
•Connecticut’s Employment Changes:
•1980-1985
+9.20%
•1990-1995
-3.60% (Introduction of Income Tax)
•2000-2005
-1.80%
•2005-2009
+.003%
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Sources: US Census, the Internal Revenue Service, CT Dept. of Revenue, CT Dept. of Labor, and Secretary of the State
Tax Policy Drives Connecticut’s Economy
Connecticut Business Changes
Business Size
Over 1000
500-999
250-499
1993
90
135
374
2006
94
113
369
% Change
+4%
-16%
-1%
Source: Census County Business Pattern
Prepared by DECD
Small Business Start Ups from 2006 – 2008
2006
2008
% Change
30,578
27,457
-10%
Small Business Closings from 2006 – 2008
2006
2008
% Change
10,208
13,439
31%
Nearly 3,500 Businesses Shut their Doors in the 1st Quarter of 2009
16% Increase in Closings over 2008 1st Quarter Data
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Source: Secretary of the State
Tax Policy Drives Connecticut’s Economy
Re-Introduction of Estate Tax in 2005
Example:
Estate tax filers dropped from 2,124 in 2002 to 770 in 2007
1995-2000
2006-2007
+33.50% number of state tax filers
-25.54% number of state tax filers
•893 Residents left Connecticut in 2002/2003 (before the re-introduction of the
estate tax)
•12,800 Residents left Connecticut in 2005 (the year the estate tax was
re-introduced into law)
•16,770 households left CT and moved to Florida between 2005-2008 (Florida
has no income or estate tax)
76% cited the income and estate tax as their reason for leaving the state
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Tax Policy Drives Connecticut’s Economy
Effects on Housing in CT from 1980-2009
Housing Permits down 50% in last year, 4th Consecutive Decline (DECD)
CT Housing Pe rmits Issue d - 1980 to 2009
35,000
20,000
15,000
10,000
12,610
8,052
7,700
8,259
8,972
9,443
8,366
7,714
9,054
11,541
10,794
9,311
9,254
9,607
9,985
11,958
11,671
9,236
7,746
5,626
5,500
25,000
10,600
9,700
10,400
16,927
19,392
30,000
19,547
26,246
30,163
27,415
After 2004, total state #s no longer counted on monthly basis.
Lower #s count only 128 monthly reporting
municipalities - historical data for these 128 municipalities
from 2002 show trend line; 2008, 2009 = est.
5,000
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2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0
“The best prospects for our people are
education, industriousness
and self-reliance”
~ Booker T. Washington
That is as true today as it was in 1901
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