In a State of the State Address that will focus on jobs and balancing the budget, Gov. M. Jodi Rell will propose a $500 million “Connecticut Credit Consortium” today that will provide loans to small and medium-sized businesses.
Rell will call for spending $100 million in state bond funds, to be combined with $400 million in loans from the state’s community banks, for a loan pool in order to help create jobs, an administration source said Tuesday night.
Rell will say in her televised speech today that credit is “the lifeline” of business in a tough economy, said the highly knowledgeable administration source.
The Rell administration cites the example that banks do not earn much money on a loan of $10,000 for a local florist to purchase inventory. As such, the business often gets turned away because the cost of the paperwork isn’t worth it for the bank, according to the administration. Rell has used the anecdote of the local florist in the past as an example of a small, struggling business that is trying to make a profit. The state, though, will write loans of that size at a time when the state’s unemployment rate is 8.9 percent and the national rate is 10 percent.
In her final State of the State address, Rell will steer her remarks toward the fiscal problems facing the state. The deficit for the current fiscal year that ends on June 30 is now projected at more than $500 million, and the deficit for the next fiscal year will be more than $250 million. Those numbers can changed quickly with the ups-and-downs of the stock market and the overall strength or weakness of the economy.
Rell had proposed a similar bank consortium soon after the Lehman Brothers investment bank collapsed in September 2008. That pool, however, involved only about $60 million to $100 million overall.
In an effort to close the deficit, some insiders expect that Rell will once again propose legalizing the controversial Keno electronic gambling game. The administration did not confirm or deny that Tuesday night.
Rell raised the issue last year, but it was dropped without a vote by the Democratic-controlled legislature during a contentious budget year. Rell believes the Keno games, which would be run by the state’s lottery corporation, would generate $20 million in the first year and $60 million in the second year for state coffers.
The move is guaranteed to prompt controversy among Democrats, who were cool to the idea last year. Attorney General Richard Blumenthal issued a legal opinion that said allowing keno could violate an agreement between the state and the two Indian casinos in Connecticut and could potentially prompt the casinos to withhold the state’s share of their slot machine revenues.
Some House Democrats, though, said they had no major problems with Keno if the games could help the state close its deficit.
Lottery-style keno is a betting game in which players pick a set of numbers from 1 to 80 by buying and filling out a play slip from a retailer, such as a restaurant or bar. The payouts can range up to $1 million.
As the state’s budget problems continue, Rell is also seeking to increase her budget-cutting authority. Rell has been trying to make deeper cuts in the budget, but she lacks the unilateral authority to make certain cuts. As such, large cuts can only be made with the legislature’s approval.
Rell is currently allowed to cut certain funds by 3 percent or 5 percent under certain conditions. Now, however, she wants to increase those totals to 6 percent or 10 percent if the state deficit grows to be 3 percent of the general fund.
If the deficit gets worse and exceeds 5 percent of the general fund, then Rell could cut as much as 10 percent “of the total appropriation from any fund or 15 percent of any appropriation,” according to her proposal.
Currently, Rell is handcuffed on certain portions of the budget. For example, cities and towns receive billions of dollars each year from the state, but Rell lacks the unilateral authority to cut that money. In addition, she does not have the sole authority, for example, to reduce health insurance and pensions for both current and retired state employees.
The six Democratic candidates who are running for governor will be watching Rell’s speech and budget proposals closely today.
Former Stamford Mayor Dannel Malloy, who is trailing Greenwich cable television entrepreneur Ned Lamont in the latest Quinnipiac University poll, is making his comments even before Rell makes her speech.
“Governor Rell said her budget speech this week would contain ‘no big surprises,’ ” Malloy said in a statement. “Based on what the people of Connecticut have seen the last few years, perhaps we could use a surprise or two.”
Administration sources, however, said this is not the year for multiple new proposals.
Besides seeking to increase her budget-cutting authority, Rell will outline a series of other fiscal proposals Wednesday at the state Capitol in an attempt to cut the state’s borrowing, reduce the debt and preserve the “rainy day” fund for fiscal emergencies.
“Simply put, state government cannot – and must not – spend what it does not have,” Rell said. “The far-reaching and devastating effects of the national recession laid bare areas of our budget process that must be strengthened and improved to ensure that Connecticut can weather this economic downturn and economic maelstroms of the future.
Rell continued, “The changes I am proposing would require contributions to the Rainy Day fund throughout the fiscal year, based on surplus projections from the comptroller. Like any household would do, if there is something left over at the end of the month it goes straight into the savings account.”
Democrats have complained that Rell has not used all of her current budget-cutting authority and question why she is seeking even more fiscal powers. Democrats are now researching the issue to determine the precise amounts of Rell’s unused authority.
The two top Senate Democratic leaders – Senate President Pro Tem Donald Williams and Majority Leader Martin Looney – said they intend to work with Rell during the short, three-month regular session.
“We look forward to seeing more details on the governor’s proposals to balance the budget and enact fiscal reforms,” they said. “Of course, the other top priority for this legislative session must be growing and protecting jobs. Senate Democrats have made a number of proposals to jump start job growth and help small businesses. We hope to hear the governor substantively address this issue” today.
In a crackdown on crime, Rell will seek to strengthen the laws against sex predators who target children and expand details on the criminals on the state’s sex-offender registry. The state will begin to adopt a multi-tiered approach to identify sex offenders by classifying them as Tier 1, Tier II, and Tier III in accordance with federal law. Currently, there are no tiers in the state system and a relative lack of details on the crimes committed.
“Those sick individuals who would traffic in the sexual exploitation of children and others will lose more than their freedom when they are convicted and put behind bars,” Rell said. “Just as we deal with drug traffickers, new laws will give the state the authority to seize any and all property they have amassed from their sinister enterprises.”
While talking on a cell phone while driving has been illegal for years, Rell will propose that texting while driving – which has become more common in recent years – should also be illegal.
The Hartford Courant’s Edmund H. Mahony tells us that both Rell and state lawmakers said they will introduce legislation today to correct potential legal defects in the existing campaign finance law – even as a crowded field of statewide candidates is embarking on what promises to be a contentious campaign season.
After a federal district judge gutted the state’s much-debated public financing law late last summer, a federal appellate court in New York City is working on what it has promised to be an expedited decision.
Meanwhile, Rell’s office and lawmakers will submit similar bills that could become quick fixes if the appeals court agrees that the existing law is flawed – and the full legislature agrees on what traditionally has been a contentious issue. With an election set for March 2 in Stratford, lawmakers are looking at the issue with some urgency. Rep. James F. Spallone, an Essex Democrat who co-chairs the Government Administration and Elections committee, said he wants a legislative hearing on his committee’s bill on February 10.
Both bills would subject major, minor and petitioning candidates to the same qualifying and fund distribution formulas. They would also eliminate a provision that would essentially repeal the law if the legislature fails to quickly respond when it is successfully challenged in court.
State assistance during times of economic distress is not unprecedented. As 42 banks were failing in the early 1990s, then-Gov. Lowell P. Weicker Jr. said the state was being forced to lend money because the banks weren’t doing it – and the Department of Economic Development became the state’s lending arm. Some of those loans went sour, including a subsidy package to Hi-G Co. Inc., a South Windsor military contractor that fell apart soon after obtaining $3.5 million in loans and grants from the state.
By September 1994, the department had made 350 loans for a combined total of more than $100 million. Weicker’s economic spokesmen said at the time that the loan-failure rate was lower than that at many banks.