Gov. M. Jodi Rell. File photo.
Gov. M. Jodi Rell today [Dec. 28, 2009] announced she has vetoed Senate Bill 2101, An Act Concerning a Deficit Mitigation Plan for the Fiscal Year Ending June 30, 2010 and House Bill 7101, An Act Concerning the Estate and Gift Tax.
She issued a release 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,” the release states, Rell is submitting legislation expanding the authority of governors to make budget cuts – also known as rescission authority.
Invoking more power
“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,” Rell 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.”
Rell states that since the budget crisis began, the vast majority of the spending cuts have come through 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… 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 has that authority,” Rell said.
Under existing law, a governor can make rescissions when a budget deficit 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.
Rell proposes that the 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…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,” Rell said.
The rescissions statute does not allow a governor to cut aid to municipalities.
In addition, the 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, Rell said.
A “feeble” $12.4 million
“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,” 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,” she said.
“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 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,” she said.
S.B. 2101 “unworkable”
Rell said she found numerous problem areas in S.B. 2101. Many of the proposed savings are likely to be “unworkable,” she said.
As an example, she noted 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, she said.
Similarly, she said, 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 stimulus funding specifically exempts disproportionate share dollars from the enhanced match, Rell said.
H.B. 7101 postpones estate tax changes
H.B. 7101 would postpone changes in the state’s estate tax that are scheduled to take effect Jan. 1 that “would raise millions of dollars through additional taxes” on the estates of those who die between Jan. 1, 2010, and Jan. 1, 2012, Rell said. [See copy of Rell's letter to Sec. of the State Susan Bysiewicz, below, for additional explanation.]
“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,” Rell said.
Posted Dec. 28, 2009
Gov. Rell’s Dec. 25, 2009 letter to Sec. of the State Susan Bysiewicz:
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 percent 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 percent 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 percent and 18 percent from 5.085 percent to 16 percent.
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