By Edward Krudy
NEW YORK, Feb 18 (Reuters) – Connecticut’s governor announced a budget on Wednesday that slashes state spending by $753 million over the next two years, delays scheduled tax cuts and closes tax loopholes for corporations.
The budget proposal highlights the continued struggles Connecticut faces after five years of disappointing economic recovery. The state’s performance has been among the worst in the nation with slow revenues and high fixed costs putting a strain of the state’s coffers.
“It really does underscore the challenges that Connecticut has faced in this economic recovery, which has been historically slow and that has really hurt the state’s ability to bounce back in the way it has from past recessions,” said Douglas Offerman, an analyst who follows Connecticut at Fitch Ratings.
The proposal comes as lawmakers have proposed two sets of cuts worth around $90 million to the state’s current spending plan in order to close a looming budget hole.
“The budget I present to you is filled with tough choices,” Governor Dannel Malloy said in a statement. “The vast majority of these cuts are choices that, under ideal circumstances, Connecticut would not have to make.”
Home of hedge funds and old New England money, Connecticut has long been one of the wealthiest states in the nation. But a shrinking financial sector after the 2008 economic crisis and a slowdown in key industries has hit the state’s finances hard.
Some of the largest cuts affect the Department of Social Services, which will lose $238.4 million over the next two years. There will be smaller cuts across a range of other areas, including higher education and government administration.
The budget does maintain spending in other important areas such as aid for municipalities, intended to keep property taxes in check and minimize the burden on towns and cities. The governor also pledged to maintain school funding at 2015 levels.
The governor is hoping to increase revenue by $356.8 million over the next two years by postponing scheduled tax cuts and sunset dates, including extending a surcharge on corporations. The budget also caps tax break for corporations by limiting the use of net operating losses and tax credits.
(Reporting by Edward Krudy; Editing by Cynthia Osterman)
- State Budget & Tax
- Budget, Tax & Economy
- tax cuts