Press Releases
10/28/2015
Gov. Malloy: We Must Put Connecticut’s Budget on a More Stable, Sustainable Path
(HARTFORD, CT) - Governor Dannel P. Malloy today held a cabinet meeting with state commissioners in an effort to help inform short and long-term budget conversations around the state. The Governor outlined the current budgetary challenges facing Connecticut, laid out his principles for addressing those challenges, and also put forward some specific ideas for moving the state forward.
Among his ideas are efforts to improve Connecticut's business climate and grow jobs, continue to shrink and increase the efficiency of state government, and make Connecticut's state employee pension system more affordable.
"Together, as Democrats and Republicans, we can use this moment to not only address our short-term situation, but also to have an important conversation about the sustainability of our budget over the long-term," Governor Malloy said during the cabinet meeting. "By setting clear priorities and making smart investments, Connecticut can create a sustainable budget and a sustainable economy."
During the presentation, the administration outlined key principles that will guide the Governor in making budgetary decisions in the weeks and months ahead:
- Maintain a balanced budget that does not rely on phantom savings
- Set clear priorities in order to increase state government productivity while controlling costs
- Provide predictability for business, nonprofits and families
- Increase Connecticut's competitiveness with a goal of making Connecticut the most competitive state in the region
The Governor also put forward some specific ideas based on those principles, which he will bring to the table with legislative leaders:
Make the Pension System More Affordable
- Split the SERS system into two funds, one a closed pay-as-you-go plan for Tier 1 retirees for whom most of the unfunded liability applies, and one open plan for Tiers 2 and 3. This fund will be 95% funded, and will be sustainable
- Reduce the investment return assumptions for both State Employee and Teachers' systems
- Implement actuarial improvements recommended by Boston College study, including use of "level dollar" amortization and a 15-year rolling amortization period
- Control future benefit costs through collective bargaining, and especially by avoiding retirement incentives, contribution holidays, or other similar damaging practices
Help Grow Jobs with Sensible Tax Restructuring
- Improve the unitary corporate tax to support Connecticut headquartered companies who invested in the future of our economy:
- Change to single-factor apportionment for the allocation of corporate income no matter where a business is based (like the majority of other states), and cap the amount of any company's additional tax due to the change
- This increases revenue from big box retailers and encourages corporations to be headquartered in Connecticut
- Encourage training and corporate headquarters in Connecticut:
- Provide a 15-day exemption from the Personal Income Tax for employees coming into the state for business development activities
- This change would facilitate headquarters functions and make Connecticut an attractive destination for corporate meetings
- Restore the 70% usage of R&D and URA tax credits:
- The R&D tax credit has spurred research, development and engineering by Connecticut firms, which has helped spur activity in the state
- The URA tax credit has been used by many of Connecticut's large employers including hospital
- Change the tax on Net Operating Losses:
- Connecticut should allow firms with significant prior-year losses to trade in 50% of those losses for an immediate exemption from the annual limit under the law, provided they continue to pay a minimum tax of $2.5 million
- This change will eliminate a significant but inadvertent penalty for firms with large one-time earnings between now and 2017
Prioritize and Protect Core Services
- Prioritize and protect core services, including education
- Preserving core services is not only the moral thing to do, it helps bolster our economy by keeping more people healthy and safe, trained and employed, and families stable. However, we need to prioritize and define these services - Connecticut can no longer afford to maintain every line item in perpetuity
- Our focus must be on services and investments that enhance our economy and our budget sustainability
Responsibly Reduce State Workforce
- Since Governor Malloy took office in January 2011, the state government workforce has approximately 1,000 fewer positions
- Through responsible management and attrition, the administration will continue to reduce the state workforce, with a target of 500 additional positions for FY16. This is a responsible path to achieve savings without significant layoffs that would affect services to Connecticut residents.
Make Targeted Reductions for FY17 and Beyond
- Connecticut must maintain a balanced budget in the current fiscal year and must be willing to make proactive, targeted reductions
- The Governor, however, is prepared to lead by making difficult choices from his rescission authority
Increase Efficiency through Negotiated Contracts
- Currently, the administration is at the negotiating table with all bargaining units but one for contract negotiations
- The administration is determined to find ways to controlling costs while maintaining productivity
Defer Raises for State Managers
- By deferring scheduled raises for 1,600 state managers - a step the Governor has already taken - Connecticut can save approximately $1 million in the current fiscal year
Create a Transportation Lockbox
- Pass a constitutional amendment creating a lockbox for transportation funds as quickly as possible
- A constitutional amendment will safeguard transportation revenues, preventing the Special Transportation Fund from being swept
- Action in the General Assembly now will ensure that the amendment can be placed on the ballot for voters in 2016
**Download: Governor Malloy presentation to cabinet members on the state budget and proposals
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