Connecticut's Dan Malloy Seeks Balance

This is a time of angry ideological showdowns in budget-writing all over the country. But you wouldn't know it to look at Connecticut. There, the governor is convinced he can prevail by sticking to a centrist course.
by | April 26, 2011 AT 12:00 PM

By Rob Gurwitt, Special to Stateline

Looking out over the crowd at a recent town-hall gathering in New Britain, Connecticut, Gov. Dannel P. Malloy noticed a woman holding up a sign. It read, "I Love Chris Christie."

Malloy's better-known New Jersey counterpart, of course, has become a national figure for his budget-cutting, slams at the leaders of public-employee unions, and pugnacious YouTube clips. And Malloy, a Democrat, has followed the Republican Christie's approach in taking his budget plans on the road, holding 17 packed town halls around the state that allowed residents to question and sometimes berate him eye to eye. But that's about where the resemblance ends.

In fact, when it comes to substance rather than style, there isn't much similarity between Malloy and any of the other 27 new governors who took office this year. He seems determined to handle things his way, regardless of what's being done in other states by either Democrats or Republicans.

"I want everyone to understand that we're doing this differently," he told the New Britain crowd that night, after calling attention to the woman's sign. "New York balanced its deficit by cutting $4.65 billion in local aid. New Jersey cut local aid by $3.6 billion over two years. In both states, that will work out largely through higher property taxes. Here, you're living in a place that already has relatively high property taxes. How would our balancing the budget that way help this community, or for that matter any community in Connecticut?"

Like most states, Connecticut is grappling with a massive budget deficit. Its $3.3 billion gap is 18 percent of its fiscal year 2011 budget; only eight states face deficits that form a larger percentage of their budgets. Connecticut also carries the highest public debt per capita of all 50 states, according to the state's Office of Fiscal Analysis.

Malloy is dealing with all this after his own fashion. In this season of assaults on public employees' collective bargaining rights, burden-shifting to local governments, and all-out cuts to education and social-welfare programs, he is confident he can move the state out of trouble by spreading pain broadly, without inflicting too much on any single constituency.

Taxes and Negotiation

The most noticeable feature of his deficit-cutting plan calls for $1.5 billion in tax increases. He is negotiating for $1 billion in givebacks from public employees, and has made it clear that massive layoffs may be necessary if no agreement is reached, but he is determined to avoid that scenario. And while he plans $758 million in wide-ranging budget cuts, he has refused to take them from state aid to municipalities or from the state's education cost-sharing formula, as has happened in many other places.

Malloy has also proposed fully funding the state's pension obligations, to the tune of $877 million, the first time in years the state has stepped up to that particular responsibility. And he is shifting Connecticut to Generally Accepted Accounting Principles, thereby ending decades of playing fast and loose with yearly accounting, even though this involves a net annual impact of roughly $100 million in extra cost.

About the only way the 55-year old Malloy looks like a standard-issue 2011 governor is in his willingness to play to voters' hunger for change in how state government operates. He has announced a plan to shrink 81 agencies -- or "separately funded state silos," as he calls them -- down to 57. "There's no justification for having so many," he says; "it just encourages behaviors that aren't cooperative and don't seek cost-savings, and it leads to an excess of management."

Malloy is taking his idiosyncratic message not only to town meetings all over the state but to local chambers of commerce and union gatherings, marking a sharp contrast with recent Connecticut governors. Members of the statehouse press corps, unused to this, joke that Malloy needs to start handing out t-shirts listing dates and venues, like a rock-concert souvenir.

Even Republicans grudgingly give him credit for his straightforward, accessible approach. "The good part about his budget is it's not fake, it's not full of gimmicks," says GOP state Senator Tony Guglielmo, a veteran member of his chamber's finance committee. "The bad part is it's full of taxes."

Hitting Everyone

In fact, it's full of all sorts of things to which Connecticut residents take exception. Malloy's plan would raise most of the taxes the state relies on. It adds new income tax brackets and raises the top rate from 6.5 percent to 6.7 percent -- just below the top rate in neighboring New York State. It increases the sales tax from 6 percent to 6.35 percent and extends it to cover such items as haircuts and inexpensive clothes. It adds a luxury tax on boats, jewelry, cars and high-end clothing, but also hits lower- and middle-income residents by raising taxes on cigarettes, gasoline and alcohol.

A March Quinnipiac University poll found that barely one-third of respondents liked his handling of the budget, with the tax increases coming in for particular disapproval. It doesn't seem to faze the governor very much.

The proposed spending cuts have been less controversial, but have still riled various constituencies. While Malloy, who was mayor of Stamford for 14 years, has kept state aid to municipalities and school districts largely untouched, his plan still eliminates state reimbursements to municipalities for a tax exemption on manufacturing; the administration has conceded that this falls especially heavily on hard-hit blue-collar towns and may be reworked by the Democratic-controlled Legislature.

Malloy's plans for agency cuts should he not get the labor givebacks he's been seeking also worry social-service advocates. "He has for the most part protected the safety net," says Terry Edelstein, president of the Connecticut Community Providers Association, an umbrella group for social-service providers. "But we're concerned that because human services are the largest part of state services, more cuts will hurt."

Quiet Bargaining

A great deal is riding on the negotiations between Malloy's administration and the coalition of state employee unions. The two men leading the talks, Mark Ojakian of the state's Office of Policy and Management and labor lawyer Dan Livingston for the unions, have known each other for years and been occasional allies on civil rights issues. In marked contrast to similar meetings in other states, their discussions have been extraordinarily closely held.

"It is impressive just how quiet it has been outside that room," says State Representative Andy Fleischmann, a Democrat who chairs the House Education Committee. "They're doing their best to just quietly work it out between themselves."

"I believe in labor and the right to organize," says Malloy. "That doesn't mean we're going to get an agreement, but I'm certainly not going to demonize them." For Malloy, layoffs may be a last resort, but they're clearly on the table. On the other hand, ramping up the tax increases should negotiations fail doesn't even make it into the realm of possibility. The increases he has proposed are as far as he will go. To summarize his program in one sentence, it is a careful attempt to achieve balance. Where other governors are choosing to tilt in an ideological direction, Malloy is determined to pursue a centrist course.

This is politically risky. One thing that became clear during the governor's town-hall tour is that his plan has something in it to annoy just about everyone. He heard -- in usually polite but occasionally combative tones -- from people who believe he's being too hard on the wealthy and from others who think he's being too easy on the wealthy; from union members who insist he's asking for too little from corporations and from business people who say he's doing too little to encourage job growth; from government employees worried that he's asking them for too much sacrifice and from conservatives who believe he's coddling state employees. All the interest groups know that their adversaries are complaining just as loudly as they are.

That highly visible divergence of opinion around the state may actually prove to be the governor's best ally in convincing the Legislature that the only reasonable course lies in satisfying no one. "You have people concerned about the cuts, you have people concerned about the tax increases, and you have people concerned about the agency consolidations," says Don Williams, the state Senate president pro tem, who is optimistic that Malloy's plans will prevail. "People know it's the worst recession of our lifetime and we have to take action. So I'm finding that while folks don't agree with everything, they do agree that we have to step up and take action. On the whole, folks realize we need to take the bitter medicine."

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