Connecticut's governor presented his new state budget proposal on Friday, which he called a "compromise" with lawmakers.
During a Friday morning news conference, Gov. Dannel Malloy agreed to a raise in the state sales tax rate to 6.5 percent from 6.35 percent and raise the sales tax on restaurants to 7 percent.
However, only if lawmakers agree to spending cuts and structural changes.
"If we fail to pass a state budget by September 30th," Malloy said. "It will cost us tens of millions of dollars."
The sales tax would still be lower than New York, New Jersey, and Rhode Island, Malloy said.
Malloy said those changes would result in revenue gains of $87 million for fiscal year 2018 and $133 million fiscal year 2019.
“We cannot continue down a path of operating the state without an adopted budget – we must meet one another in the middle,” Malloy said. “To reach compromise, I have scaled back some of my proposals, I have adopted some of the best ideas from legislators of both political parties, and I have tried to be responsive to the needs of municipalities within the limited resources the state has at its disposal. This budget represents real, structural change, and it uses new revenues only as a last resort after achieving historic labor concessions and making hundreds of millions of dollars in difficult spending cuts.”
Read the complete proposal here.
This was the third proposal for a state budget that the governor has put forward.
"I was confident in January that people would realize reality. I was confident in February that people would realize reality," Malloy said. "Every time we put out a budget or executive order, that people would realize reality. I was wrong. It's time now that people recognize that damage will be done and additional tens of millions of dollars will be lost each and every month there's not a budget."
Until this week, Malloy was against the Democrats' proposal of raising the sales tax.
In exchange for it, the governor said he wants structural changes when it comes to cities and towns. He wants municipalities to help pay some of the costs for teacher pensions. Though, the newest plan is less than what he originally proposed. He also wants changes in how education funding is given to cities and towns.
Malloy's formula would be based on need.
The state has been operating without a state budget for 70 days and people impacted by that said the pain is growing by the day. For months, it's been all talk and no action in the capital.
Democrats and Republicans have failed to come to an agreement on a spending plan.
House Republican Leader Themis Klarides called the governor's latest budget plan as “more of the same."
“Once again the Governor resorts to tax hikes to solve the deficit that was created by tax increases that stymied economic growth. This plan raises taxes by $1.2 billion over the next two years,’’ Klarides said in a statement on Friday. “This is no compromise, this is a slightly different version of what Democrats have been talking about for months.’’
The Republican budget is still a work in progress. They were hoping for more union concessions and there's a $300 million hole. Klarides said Republicans will "examine the proposal more closely in the next few days."
"The plan raises taxes on hospitals, reduces the property tax exemption, hikes the conveyance tax and others, she pointed out. When it comes to the hospitals, they have become Gov. Malloy’s favorite target to grab more revenue from some of the state’s biggest employers,’’ Klarides said.
House Speaker Joe Aresimowicz is one person who is optimistic.
"I see it as a positive step forward as long as the long the governor and everyone else is willing to compromise and negotiate for six or seven days until we scheduled vote," Aresimowicz said.
Malloy said he made some compromises he hopes will get the deal done. He said the last-minute changes were made to get lawmakers to act.
"Every time we put out a budget or executive order that people would realize reality. I was wrong," Malloy said. "It's time now that people recognize that damage will be done and an additional tens of millions of dollars will be lost each and every month there's not a budget."
The latest budget proposal includes a new restaurant tax of 7 percent. The increase could only be a few cents more, but customers and the Connecticut Restaurant Association still don't like it.
"It's ridiculous," Christine Pane, of Rocky Hill, said. "Our own budgets we wouldn't be able to do that with why should the state. The state needs to get this resolved."
Salute restaurant owner James Cosgrove said he doesn't think a small increase will keep away many customers. Cosgrove said he feels if it happens and wants Hartford to get the money and not in the hands of lawmakers.
"I don't think they would blink if a tax was going to the city of Hartford, but it’s been brought to my attention,” Cosgrove said. “That it's going to the state and where does the tax end up."
Under the governor’s plan, the state would use some of the money for municipal aid. The Connecticut Restaurant Association doesn't like this at all and said the tax is targeting businesses.
"Any action government takes that effectively raises prices hurts small business owners and consumers,” the Connecticut Restaurant Association told Eyewitness News.
Matthew Banever is a store manager.
"It is a deciding factor. It's not at all,” Banever said. “But, it's one more thing and that's what a lot of people in Connecticut are bothered by."
In a preview released on Thursday, Malloy said he is willing to increase aid to cities and towns by roughly $25 million over two years. He also backed off on his proposal to make cities and towns pay more for teacher pensions.
Lawmakers are expected to return to the capitol on Thursday.
If an agreement is not reached by the end of September, the pain will really be felt in school districts, who will have to lay off more teachers.
To see the state and local sales tax rates in 2016, click here.
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