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STATE OF CONNECTICUT
EXECUTIVE CHAMBERS
HARTFORD, CONNECTICUT 06106 |
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M. Jodi Rell
Governor |
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FOR IMMEDIATE RELEASE
December 28, 2009
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Contact:
860-524-7313
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Governor Rell Vetoes Both Democrat Deficit Bills
Calls $12 Million in Cuts ‘Feeble’ Attempt to Reduce Spending,
Submits Legislation to Expand Governor’s Rescission Authority
Governor M. Jodi Rell today announced she has vetoed House Bill 7101, An Act Concerning the Estate and Gift Tax, and Senate Bill 2101, An Act Concerning a Deficit Mitigation Plan for the Fiscal Year Ending June 30, 2010, calling both bills further examples of the Democrat-controlled Legislature’s refusal to confront the reality of the state’s financial crisis by cutting spending. Because the majority party in the Legislature is unable to make the needed cuts, Governor Rell said she is submitting legislation expanding the authority of Governors to make rescissions.
“Called into special session to deal with a budget deficit estimated between $337 million and $550 million, the Democrats in the Legislature managed to trim state spending by a feeble $12.4 million,” Governor Rell said. “It is a repeat of the same pattern we have seen time and again this year: Regrettably, it is an outright refusal to admit that state spending has far exceeded the ability of state taxpayers – any state taxpayers – to pay for it.
“The Democrats want to move money around from one account to another and one fiscal year to another in the vain hope that increased taxes will fill the holes left behind,” the Governor said. “The increased taxes passed this summer have not produced the expected revenue – why do they think more taxes would change that? Homeowners and employers in Connecticut are not able to balance their checkbooks this way and they will not stand for lawmakers trying to do so. They are not taken in by legislative finger-pointing – nor are the state’s newspapers.”
The Republican-American of Waterbury editorialized December 23rd, “[the] Democratic supermajority … continued its pattern of stall and denial by reducing expenditures by a mere $12 million, raising taxes by $76 million on the dead (and $130 million on the living) and telling Gov. M. Jodi Rell to clean up the rest of the mess.” The New Haven Register noted Monday, “the Democrats did next to nothing. … The Democrats not only did not fix the budget, they made the problems for next year’s budget, already filled with one-shot revenues and unspecified borrowing, even worse.”
Governor Rell said she found numerous problem areas in S.B. 2101, noting that many of the proposed “savings” are likely to be unworkable. For example, the bill merges the Board of Firearms Permit Examiners into the Department of Administrative Services (DAS). But DAS has neither the staff nor the law enforcement authority to perform the firearms board’s work.
Similarly, the Office of Policy and Management (OPM) has raised concerns about the bill’s attempt to convert “disproportionate share” dollars – money paid to hospitals for treating uninsured and underinsured patients – into a Medicaid rate increase that would be matched by the federal government under the stimulus law. OPM notes that the federal government might not make the matching payment because the stimulus specifically exempts disproportionate share dollars from the enhanced match. Moreover, recharacterizing these funds on a temporary basis may raise concerns at the federal level.
“The reductions made in this bill are inadequate and many of the provisions expected to result in savings will not do so,” Governor Rell said. “The people of our state want their elected leaders to make a good faith effort to address the deficit and provide workable alternatives to current programs. It is simply unacceptable for the majority party in the General Assembly to nibble away at the problem without making the hard choices that our current economic reality requires.”
H.B. 7101 would postpone changes in the state’s estate tax that are scheduled to take effect January 1, effectively raising millions of dollars through additional taxes on the estates of those who die between January 1, 2010, and January 1, 2012.
“I have already made it absolutely clear that I will not accept legislation that seeks to close this budget deficit through new or higher taxes, or through additional borrowing,” Governor Rell said. “The General Assembly has become addicted to spending then taxing and borrowing to pay the bills for their extravagance. This approach is simply not sustainable. I cannot and will not support yet another tax increase, even a temporary one, at a time when so many of our residents are already struggling.
“The failure by Democrats in the Legislature to address the shortfall in the budget they passed just three months ago demonstrates – yet again – that they are simply incapable of cutting state spending,” the Governor said. “If they are not willing to do what it takes to reduce government spending, then they must give me the power to do it by increasing the rescission authority of the Governor.”
Since the budget crisis began, the vast majority of the spending cuts that have been made have come through the Governor’s use of her statutory authority to order rescissions – generally, cuts in Executive Branch agency budgets –granted in Section 4-85(b) of the Connecticut General Statutes.
“The legislation that I have drafted does not give a Governor unlimited power to slash budgets,” Governor Rell said. “Writing and following a state budget is – and should remain – a balanced process, something that involves all three branches of government. But when the process – and the budget – is badly out of balance, as is certainly the case right now, someone must be able to restore that equilibrium. As Chief Executive of our state, it makes sense that a Governor have that authority.”
Under existing law, a Governor can make rescissions when a budget deficit exists that is greater than 1 percent of the General Fund. Current rescission authority is limited to up to 3 percent of the total appropriation from any fund or 5 percent of any appropriation.
Governor Rell is proposing that a Governor’s rescission authority be increased incrementally:
- Up to 6 percent of the total appropriation from any fund or 10 percent of any appropriation when a deficit of 3 percent or more exists
- Up to 10 percent of the total appropriation from any fund or 15 percent of any appropriation when a deficit of 5 percent or more exists
“These are modest – but necessary – changes,” Governor Rell said. “They will help ensure that the failure of the usual system for dealing with budget shortfalls does not wind up creating a lingering crisis or – worse – being solved on the backs of taxpayers with tax increases or ill-considered borrowing.”
The rescissions statute does not allow a Governor to cut aid to municipalities. In addition, as a practical matter, a Governor is constrained from cutting appropriations for entitlement programs or pension and health benefits for state employees and retirees – expenditures that comprise much of the budget.
The governor's veto messages are attached below:
December 28, 2009
The Honorable Susan Bysiewicz
Secretary of the State
20 Trinity Street
Hartford, CT 06106
Dear Secretary Bysiewicz:
I am returning to you without my signature House Bill 7101, An Act Concerning the Estate and Gift Tax.
Under current law, the following changes are scheduled to take effect for deaths occurring and gifts made on or after January 1, 2010: (1) an increase, from $2 million to $3.5 million, in the minimum value of an estate or gift subject to the estate and gift taxes; (2) a reduction of 25% in marginal tax rates on estates and gifts valued at $3.5 million or more; and (3) elimination of the so-called “cliff” in the tax.
House Bill 7101 delays the increase in the tax threshold and the 25% rate reduction for two years, but retains the elimination of the “cliff” effective January 1, 2010. Since elimination of the “cliff” will result in a revenue decrease, the bill temporarily increases the tax rates on taxable estates and gifts to a range of between 8% and 18% from 5.085% to 16%. These higher rates affect estates of those who die, and gifts made, on or after January 1, 2010 and before January 1, 2012.
As I have repeatedly stated, I do not believe that we can tax our way out of our current economic difficulties. The General Assembly has become addicted to spending and taxing and borrowing to pay for their extravagance. This approach is simply not sustainable. I cannot and will not support a tax increase, even a temporary one, at a time when so many of our residents are already struggling.
We must, instead, accept the fact that we cannot afford our current state government. I understand and appreciate the good intentions of the proponents of this bill, but I believe we must stand firm. We cannot make exceptions for well-intended bills, because, frankly, most are well-intended.
Accordingly, pursuant to Section 15 of Article Fourth of the Constitution of the State of Connecticut and Article III of the Amendments to the Constitution of the State of Connecticut, I am returning House Bill 7101 without my signature.
Very truly yours,
M. Jodi Rell
Governor
December 28, 2009
The Honorable Susan Bysiewicz
Secretary of the State
20 Trinity Street
Hartford, CT 06106
Dear Secretary Bysiewicz:
I am returning to you without my signature Senate Bill 2101, An Act Concerning a Deficit Mitigation Plan for the Fiscal Year Ending June 30, 2010.
As you know, when I called the General Assembly into special session to address the State’s budget deficit, I presented a comprehensive deficit mitigation plan. I proposed spending reductions, fund sweeps and other measures which would fully address the projected $337.1 million deficit.
In contrast, Senate Bill 2101 makes modifications and revenue adjustments to the FY 10 budget which will result in a $39.8 million net reduction in the anticipated FY 10 General Fund deficit. This modest reduction is achieved by reducing General Fund expenditures by $12.4 million and increasing revenue by $27.4 million. Even including the revenue that would be generated by Senate Bill 7101, An Act Concerning the Estate and Gift Tax, the General Assembly has failed to address the remaining deficit of approximately $200 million. Once again, the General Assembly has demonstrated its proclivity for avoiding its responsibility.
In addition, many of the so-called “savings” to be achieved in the bill are simply unworkable. For example, the bill merges the Board of Firearms Permit Examiners into the Department of Administrative Services (DAS). DAS, however, does not have staff on board that provide services that are similar to what the board will require. DAS, for instance, currently has no law enforcement authority, it does not issue any permits or licenses and does not conduct administrative hearings. In order for DAS to properly support the work of the board, therefore, DAS will need to hire additional staff for which no funding is provided. The projected savings associated with this provision are clearly overstated.
The Office of Policy and Management has raised concerns about the bill’s attempt to convert disproportionate share (DSH) dollars into a Medicaid rate increase. OPM notes that the potential for an increased federal match pursuant to the American Recovery and Reinvestment Act of 2009 (ARRA) may not materialize because ARRA specifically exempts DSH from the enhanced match. They also caution that recharacterizing these funds on a temporary basis may raise concerns at the federal level. In addition, if the higher hospital rates endure beyond FY 2010, the State will likely face future increased costs. OPM estimates an additional Medicaid cost of $4 million by FY 2012, as caseloads increase. Finally, OPM notes that if any hospital exceeds its upper payment limit, the revenue anticipated by this provision may not be realized.
Sections 17 and 18 allow the Teachers’ Retirement Board (TRB) to pay its health care consultant out of the TRB health fund, instead of its OE account, as has traditionally been done. While it is not clear to me that this is an acceptable use of this fund, I am certain that this provision sets a dangerous precedent by diverting funds that have been set aside to pay health care premiums for TRB members to pay for a consultant. Further, this provision is unrelated to deficit mitigation and, if the General Assembly would like to expand the permissible uses of this fund, such proposal should be handled through the normal legislative process.
Finally, Senate Bill 2101 appears to require the elimination of one of the two Governor’s Foot Guard and Horse Guard companies, although this elimination is not referenced in the bill itself, but rather the OLR analysis. These units are among the oldest militia in the country, having been founded in 1771 and 1788, respectively. In fact, the First Company Governor’s Foot Guard is the oldest military organization in continuous existence in the United States. If it is the intent of the General Assembly to eliminate any of these historic military organizations, they should specify such and identify which company is to be eliminated.
As I stated above, the reductions made in this bill are inadequate and many of the provisions expected to result in savings will not do so. The people of our State require that we make a good faith effort to address the deficit and provide workable alternatives to current programs. It is simply unacceptable for the General Assembly to nibble away at the problem, without making the hard choices that our current economic reality requires.
Section 4-85 of the general statutes authorizes the Governor to make a limited amount of budgetary rescissions if the Governor determines that estimated budget resources will be insufficient to finance all appropriations in full. I have almost exhausted my ability to make rescissions pursuant to this section, wherever it is practical to do so. If the General Assembly cannot or will not take the necessary steps to address our deficit, I would request that they increase my rescission authority pursuant to section 4-85 to allow me to do so. To that end, I have attached to this veto message a draft bill that increases the Governor’s statutory rescission authority.
I strongly urge the General Assembly to return to the State Capitol to either address the State’s budget deficit in a comprehensive manner or to give me the authority to do so.
For the foregoing reasons, pursuant to Section 15 of Article Fourth of the Constitution of the State of Connecticut and Article III of the Amendments to the Constitution of the State of Connecticut, I am returning Senate Bill 2101 without my signature.
Very truly yours,
M. Jodi Rell
Governor
