They’re Back

By Stephen Singer

Two business executives on Wednesday brought back to life their proposals to fix Connecticut's broken budget and slow-growth economy.

James Smith and Robert Patricelli, who earlier this year headed a panel of business executives that recommended personal income tax cuts and higher sales and corporate taxes among numerous other proposals, submitted what they call “Report 2.0.”

The recommendations for Gov.-elect Ned Lamont and the new legislature that convenes in January follow proposals made to Gov. Dannel P. Malloy and lawmakers who modified the work of the Commission on Fiscal Stability and Economic Growth.

“The recommendations contained in Report 2.0 have evolved from our original proposals,” Smith and Patricelli said. “They are fewer and more focused than the original recommendations, yet remain centered on the same critical goals for Connecticut: Create a path toward fiscal stability for our state government, stimulate real economic growth and job creation and make Connecticut competitive with other states once again.

Smith, the retired chief executive officer of Webster Bank, and Patricelli, former CEO and chairman of Women’s Health USA, a provider of services to physician groups who treat women, head the panel.

The report recommends the state deficit be reduced by at least $1 billion without tax increases by cutting spending and improving revenue collection.

It urges a halt to growth in state employee wages and benefits and increase employee contributions to pension plans.

Organized labor jeered the report.

“Christmas appears to have come early for the richest 1 percent in Connecticut,” said Salvatore Luciano, executive vice president of the Connecticut AFL-CIO. At least, that’s what the ‘Yacht Club Commission’ was hoping for when they released their latest plan that will almost exclusively benefit corporate CEOs and wealthy corporations.”

The plan lowers corporate taxes and income taxes for the state’s millionaires, but keeps the income tax rate the same for middle and lower-income workers, he said.

The commission’s plan recommends that Lamont and legislators reduce taxes on businesses and individuals and pay for the lost revenue by expanding the sales tax base rather than by increasing rates.

Other suggestions are to enact legislation for public-private partnerships to finance transportation improvements; fund 4,000 scholarships a year in public and private four-year colleges and universities for science, technology, engineering and math; and focus state municipal aid on cities and towns that need it most.

At a news conference, Patricelli and Smith said their initial plan to fix the state's finances ran up against political realities in the legislature.

"The original package really was a lot to swallow,'' Smith said.

After the initial report was released, members of the panel scheduled meetings across the state "and we listened and we learned and we realized we should be more focused while remaining completely nonpartisan in our approach," he said.

"We did learn a lot about how the building functions,'' Smith added, referring to the Capitol.

Patricelli, Smith and other members of the panel met earlier with legislative leaders also have spoken with Gov.-elect Ned Lamont.

While most of the concepts in the revised report will a require significant investment of time and political will, several are less of a heavy lift, Patricelli said. He cited a plan to place tolls on certain bridges to pay for public works repairs and a proposal to borrow $80 million annually to fund scholarships in science, technology, education and math..

.“We must avoid being lulled into complacency by the recent good news of growth in tax receipts and signs of some improvement in the state’s economy,” Patricelli and Smith wrote. “Despite these positive developments Connecticut’s fiscal condition is not sound, our tax system and infrastructure are not competitive and our economy remains weak. “

State tax revenue projections surged two weeks ago, reducing the projected deficit in the coming two-year budget and leaving Connecticut with nearly $2.1 billion to apply to the deficit.

Malloy and the legislature upgraded revenue projections for the coming biennium budget by $880 million.

Despite the positive budget developments, Patricelli and Smith said fixed costs — interest on debt, Medicaid and public employee retirement benefits — continue to grow as a percent of the state’s general fund by nearly 6 percent a year and will consume 53 percent of the state budget by the 2020 budget year.

The costs also are causing budget deficits to grow by more than $500 million a year, they said.

Patricelli and Smith cited Connecticut’s slow-growth economy, which undermines job creation, personal income, consumer spending and tax revenue.

Courant Staff Writer Daniela Altimari contributed to this report.