Face the Facts: CT Mirror reporter talks about budget tax cut impact

The largest income tax cut in state history is coming our way in the near future since the governor signed a two-year budget into law this week.

But what does that really mean for your wallet? And can the state still handle its responsibilities, including paying down almost $90 billion in long-term debt?

NBC Connecticut's Mike Hydeck spoke with Keith Phaneuf, a budget reporter for the Connecticut Mirror.

Mike Hydeck: He's been doing this for decades. Keith, let's start with the income tax cut. Is it, first of all, really the largest and who sees the most relief?

Keith Phaneuf: It is the largest. But, and I don't mean this in a bad sense, just keep in mind, we raise taxes a lot more often than we cut them. I'm not saying it's as minimal a claim as being the world's smartest termite. But it's probably worth about $300 to $500 a year for most middle class families. We lowered the two smallest marginal rates on the income tax. Once a household starts making about more than $200,000 a year, that benefit is going to phase out pretty quickly. But also Mike, we increased the income tax credit for the working poor, that's about another $200 a year mostly for families making less than $60,000. And we also broadened the current income tax exemption for certain pension and annuity earnings.

Mike Hydeck: So this is an interesting question, because I don't know how this works. The union that represents healthcare workers for group homes, they were protesting for three weeks straight. They claimed they were left out of this budget. Local 1199 NE struck a deal though this week after the budget was signed, how does that work? Does the money come from somewhere else?

Keith Phaneuf: No. What it is and for the viewers who are not as familiar with this, we deliver the bulk of state sponsored social services not through state employees, but through small community based nonprofits. These are folks who work with people with developmental disabilities, people struggling with mental illness and addiction issues. They will help people transitioning from prison into society. Most of this is all done through the private nonprofit sector, quite frankly, they're paid a lot less than state employees make, and the overwhelming bulk of their money these community agencies get comes from either the state budget or from the federal government, if there's some Medicaid reimbursement. When the group homes went on strike, they were actually joined in a lot of cases on the picket lines by folks from the nonprofit industry. They're adversaries in theory at the bargaining table, but they were all working together. The nonprofit industry says it needs something like $500 million more a year from the state to make up all they've lost due to inflation over the last 15 years. They got about $103 million a year extra added to the budget. It was a much smaller increase than they were looking for. Once that was done, I think the union and the nonprofit leaders settled. They haven't released all the details. But workers who were making $17 and $18 an hour who hope to get up to 25 are probably getting closer to about $18.50 right now. They just basically had nowhere else to turn. So you'll probably see more strikes and more protesting next year.

Mike Hydeck: It seems like it. We got a chance to talk to them on a regular basis when they're out there on the picket line. And they say 'look, we haven't received any kind of increase in a decade in some cases.' So they wanted to try to make ends meet. I foresee more protests coming in the future. Moving forward, some lawmakers are calling the spending caps the guardrails that are on too strict, yet they unanimously approved them. How can they have it both ways? Are they looking for workarounds? Or is this all just posturing politically?

Keith Phaneuf: Well, I mean, I think you're right, Mike, they can't have it both ways. And they moved very quickly in February and a lot of folks said they did posture, and they unanimously renewed our spending cap, our cap on borrowing, these other two programs that forced the state to save a lot of the tax receipts we get from capital gains and dividends. And then folks said afterward, 'well, wait a minute, we need some flexibility because the spending cap doesn't really take into account things like the pandemic.' I mean, nothing does. Folks are saying that, you know, with the really high inflation, even though that's factored into the spending cap, it can't compensate for what we've had. And don't forget, too, the spending cap was never produced after some exhaustive study. People took their best guess when they put that together, the most recent spending cap in 2017, after we'd been battling for about nine months without a budget, folks needed to get that resolved. So it was thrown together pretty quickly. And one last point, Mike, we have tons of workarounds around the cap and always have. We can intercept revenues and pull them outside the budget. We can borrow for ongoing expenses. We can take surplus from this year, carry it forward into next year. And it was actually, it's not counted against next year's spending cap. There are a lot of ways around it. The spending cap, to a certain extent, is just there for appearances. And I think there's an ongoing fight there between the governor and the legislature about how many workarounds we have to do. We did some. We carried about $340 million of this year's surplus into the next budget.

Mike Hydeck: So there is something in this process, every time we have a budget, I tried to get you to explain this, because it still confuses me even, called the implementer. It's part of the budget process. And when you hear the word implementing it sounds like well, the lawmakers made all these decisions. And now we're just going to implement each one of those decisions. But that's another way they can add legislation and/or pending, right?

Keith Phaneuf: Sure. And you actually summed it up perfectly. When you're dealing with a budget that's spending $25 billion a year and you've made new programs or program expansions, you've got to actually spell out how these are going to work. And those are all the different policy segments of the budget bill that have become known as the implementer. Actually, in times past, we'd sometimes vote separately on the implementer or a series of them. Lately, it's been rolled more into the overall budget bill. But it is an opportunity to take some legislation that didn't fare as well, it's been struggling, it didn't make it to a House or a Senate vote, and put it into the implementer. So if you want to adopt the budget, you've got to also get this done. I mean, we had one proposal, the governor wanted to impose some additional tipping fees on cities and towns to offset the cost of shipping waste out of state and to encourage recycling. If that got moved into the budget bill, the Republicans who supported it said they were prepared to take a walk. Ultimately, it got taken out. Sometimes you do get things slipped in at the last minute that don't belong there. And you get a lot of good things done in the implementer, too.