It is finally here - Governor Malloy just presented his budget proposal. We knew it was going to be a tough budget year, so there are plenty of things to talk about and discuss. We have a FESC meeting this Friday, 9.30 to 11,30 am, specifically to go over the whole thing and plan ahead. Make sure to come, and there is a lot to talk about.
On to the budget, then. Let´s start with the basics:
- Text of the Governor´s budget address
- Full budget details
- Slides covering the main points.
- Press release
That said, some very early, very quick takes on the budget:
The deficit is still a bit north of $1 billion. To close the gap, the Governor is relying in a mix of spending cuts ($590 million) and revenue increases (not exactly taxes, but close enough), mostly tax cuts promised for this year that will not happen, some tweaks to the sales tax that will increase revenue and money from a settlement with Standard & Poor´s from the financial crisis.
- No layoffs, but a good deal of attrition in the states labor force; 300 positions, or a 2% workforce reduction in two years.
- Full day kindergarten for all children in the state.
- If you like transportation (and you should) the budget has some very good news; the New Haven-Hartford-Springfield rail line is still on track, and there is quite a lot of investment fixing up Metro North, as well as some road projects. More information here and here.
- Second Chance Society Initiative: some significant changes in criminal justice, including eliminating minimum sentences in some areas, reducing penalties for simple drug possession to misdemeanour and streamlined parole proceedings for non violent offenders.
- The State EITC is not restored to 30% of the federal credit, and remains at 27.5%
- Many important line items remain frozen: municipal aid and ECS funding, for instance, have not seen a nominal increase for the past few budgets, what amounts to a fairly real cut in the past few years.
- Significant program cuts in the department of labor: STRIVE, Jobs Funnel and youth employment, among others, lose more than $5 million in funding.
- The Department of Social Services got hit with big cuts:
- Husky A adults earning above 138% of the Federal Poverty Line will be shifted to Health Access CT, and will have to pay premiums with federal subsidies (a $44.6 million cut).
- The biggest hit, however, was on Medicaid reimbursement rates: $43 million to providers, $5.1 million to low cost hospitals, $4.3 million to ambulance services.
- Healthy Start got zeroed out, among other programs, cutting $8.1 million.
- The overall budget cut looks smaller because they are getting $55 million from new revenue: an update on the Hospital Provider Tax.
- The Office of Early Childhood saw a slew of programs cut, including Help Me Grow, the Community Plans for Early Childhood and Family School Connection (about $2 million)
- Some cuts on higher education: the Uconn block was reduced by $27 million, and Board of Regents saw cuts both on Transform CSCU ($12 million) and their block grant ($4 million). Remedial education pilots and funding are also being cut; we are trying to see exactly by how much.
The budget really does not add up unless one assumes an increase in revenue to appear in the April budget report. It might be there (the economy is actually doing fairly well), but still. We will see.
That’s why the IRS started EITC Awareness Day, a day dedicated to encouraging organizations to bring attention to the EITC and free tax filing assistance. This year, EITC Awareness Day will take place on Friday, January 30.
The EITC is a refundable federal tax benefit for lower- and moderate-come workers that can be worth up to $5,143. To find out how much money a worker might receive, check out this quick EITC estimator.
To claim the credit, one must file a tax return. Free tax filing assistance is available through the IRS sponsored programs VITA (Volunteer Income Tax Assistance) and TCE (Tax Counseling for the Elderly). Click here to find a site in your area.
No sites nearby? There’s another option! MyFreeTaxes allows taxpayers with household income less than $60,000 to file federal and state tax returns online for free. Visit www.myfreetaxes.com to learn more.
Thirty years ago, in the 1980s, close to 60% of the income of all Americans came from work. Today, this figure is barely over 50%. This numbers come from a wonderful study produced by Wells Fargo (you can find it here). Danielle Kurtzleben, at Vox, highlights this chart that explains were income is coming from now:
Surprised? Government transfers have increased its share five points, although the reason behind this is simple: demographics. There are many more Americans on social security now than 34 years ago, meaning that a higher share of income comes from the government, not from wages. This is part of a long term trend - and it is one of the few things that have contributed to the very modest rise in income for most Americans in the last few decades.
Of course, this graph doesn´t tell us much about how income is being distributed, and how it compares to the returns of capital. We discussed this last month, talking about inequality - more here. Spoiler alert: it is not pretty.
Wednesday evening marked the end of the very unpredictable 2014 Legislative Session, and Connecticut’s low-income children and families have much to celebrate! The past few months have seen an increase to the minimum wage, a partial restoration of the Earned Income Tax Credit, and a major expansion of the state’s early childhood care and education programs. The budget also included a substantial increase in funding for remedial education at the state’s higher education institutions and protected resources that go to the state’s legal aid clinics – both investments being critical for our state’s most vulnerable citizens.
Below we have highlighted a few of the “good”, “bad” and “ugly” legislative developments. Our full breakdown of all the bills we had been watching that affect low-income children and families is available here.
- Connecticut is First State to Raise the Minimum Wage to $10.10. Public Act 14-1 increases the state’s minimum wage to $10.10 by 2017. This increase will directly help 140,000 workers, many of whom are women leading single parent families, move out of poverty. A higher minimum wages means greater financial stability for vulnerable parents and children, reduced need for government safety net programs, and higher earnings for students who are working to pay for college.
- Budget Agreement Restores CT’s Earned Income Tax Credit (EITC) to 27.5% of the federal EITC. In 2012, Connecticut implemented a state EITC equal to 30% of the federal EITC. This was reduced in the last legislative session to 25% of the federal EITC for 2014. Despite late session concerns about the budget and available resources, the legislature restored the EITC to 27.5% for 2015, as called for in the biennial budget. Research shows that the EITC is one of the most effective anti-poverty programs that are directly targeted to low-income working families.
- Full Establishment of the Office of Early Childhood. Governor Malloy created the Office of Early Childhood by Executive Order in 2013, to help ensure a strong and effective system of care and education for young children. Previously personnel and programs that made up the state’s early care and education “non-system” were scattered across five agencies – creating confusion and inconsistency. The legislature brought much needed stability by enacting HB 5562, which puts the Office of Early Childhood in law.
- Senate Fails to Pass Legislation Tackling the Issue of Chronic Absence. Both national and state-level research demonstrates that when children miss more than 10% of the school year, regardless of the reason, they fall behind and almost never catch up. Legislation that would define the problem of chronic absence, and provide school resources to help families with frequently absent children, was never called by the Senate after passing the House, 93-44.
- “Pay It Forward” College Payment Study Does Not Garner Enough Support. A bill that would have the state study the feasibility of having students attend public universities for free, in exchange for a portion of future earnings, failed to be voted on the Senate before the close of session.
- A Shaky Budget. After the legislature unveiled their budget on Saturday, critics expressed concerns with some of the measures used to balance it. Particularly troubling was a $75 million line item that relied on the collection of back taxes, with few details about how this funding would be recovered. While we applaud the legislature for its support for low-income families in this budget, it is equally important that we are honest about the state’s finances to ensure the CT is able to continue funding our safety net programs for years to come.
- Remedial Education Reform Delayed. Connecticut approved an ambitious reform for remedial education in 2012. For the past two years, the Board of Regents has worked with state universities and community colleges to implement the changes. As some institutions have struggled to meet the fall 2014 deadline to fully roll out the reform, the legislature has decided to give the option to community colleges to delay its implementation until 2015. This may postpone some much needed changes in the system, but the legislation opens the door for those colleges that are ready to roll out the reform.
We want to take this opportunity to thank each and every one of you for your support through out this session — these successes would have been impossible without you! We look forward to building on this momentum, and to continue the fight for policies that allow all children and families thrive, regardless of income, in 2015.
Statement from our Executive Director, Jim Horan, on House and Senate Passage of a Raise to the Minimum Wage (Senate Bill 32)
Hartford, CT - Today, both chambers of the Connecticut General Assembly passed SB 32, a bill which increases the state's minimum wage to $10.10 by 2017 and provides a meaningful raise to our lowest income families. With these votes, SB 32 is now being transmitted to the Governor, and once signed, the State of Connecticut will have the highest enacted minimum wage in the country. We applaud our state lawmakers for their leadership on this issue, and for providing a strong example to the rest of the country and Congress.
This increase in the minimum wage will directly help 140,000 workers, many who are women with children, move out of poverty. Under Connecticut's current minimum wage of $8.70, a minimum wage worker working full time, 52 weeks a year, earns only $18,096 a year. The federal poverty level for a family of three (for example a mother, and two children) is $19,790. With the increased minimum wage of $10.10, this same mother will now earn $21,008 a year. This higher wage means greater financial stability for families, reduced need for government safety net programs, and higher earnings for students who are working to pay for college.
We thank Governor Malloy for his leadership on raising the minimum wage to $10.10 and the members of both the House and Senate for passing Senate Bill 32. Connecticut is a leading state in addressing poverty and promoting economic success through progressive policy change, including the state EITC and paid sick days, and now this increase in the minimum wage.
The Connecticut Association for Human Services (CAHS) is a nonprofit policy and program organization that promotes family economic security strategies to empower low-income working families to achieve financial independence. Our mission is to end poverty and engage, equip, and empower all families in Connecticut to build a secure future.
As we continue to follow Governor Malloy's proposal to raise the state minimum wage to $10.10, and the President's effort to do the same on the Federal level, we wanted to share with you some great work that is being done by our friends at the Economic Policy Institute (you can read some of our previous blog coverage on the minimum wage campaign here).
One of the most pervasive myths about the minimum wage (second only to the fear that a raise is a job killer -- in a previous post we shared a number of resources that debunk this misconception) is that it is mostly being earned by teenagers who need spending money. This infographic produced by EPI shows us that this is not the case:
A 2012 analysis produced by EPI told a similar story; in that year EPI determined that if the minimum wage had been raised to $9.80 here in Connecticut over 80% of the effected workforce would have been individuals over age 20.
These minimum wage earners are also disproportionately women. This map from the National Women's Law Center shows that nationally almost two-thirds of minimum wage workers are women, while here in Connecticut, women are six out of every ten minimum wage earners.
So as we can see -- a minimum wage increase is a targeted reform that will help women and families in Connecticut, and across the country, move out of poverty and towards economic stability. Continue to follow us here on the blog, as well as on Twitter and Facebook, for updates on the state and federal campaign.
Yesterday afternoon President Obama stopped by Central Connecticut State University in New Britain where he made his case for increasing the federal minimum wage to $10.10 (current federal minimum wage is set at $7.25, Connecticut's minimum wage is $8.25). Flanked by Governor Dannel Malloy, as well as the Governors from Massachusetts, Vermont, and Rhode Island, the President called on Congress to "give America a raise" and highlighted how the increase would help women and young people.
In our previous post, we discussed the the benefit a wage increase has on both our lowest-earning workers and the state's budget. Several news reports following the event, that can be viewed here and here, featured quotes from Democratic lawmakers indicating the high probability of the legislature passing a minimum wage increase during this legislative session. Tom Foley, the likely Republican candidate in this fall's governor's race, has stated he favors a minimum wage increase. There is also overwhelming public support, with the latest Quinnipiac poll showing voters backing the measure 3-to-1.
An increase in the minimum wage is an important first step in helping our state's families move out of poverty and towards economic security. In future posts, we will discuss other aspects of the President's economic agenda for 2014, which includes a more robust earned income tax credit with new support for single adults, additional job training programs, and expanded early childhood education opportunities.
If you are looking for some effective policy proposals to help low income families thathappen to have broad bipartisan support, Washington has not been the best place to look of late. After the SNAP cuts approved last week in the House, it is hard to believe there is much interest in helping low income families in the short term.
There is one policy that it is both very effective and that has been receiving plaudits from both sides of the aisle of late, however: the Earned Income Tax Credit, or EITC. The Center on Budget and Policy Priorities has a great article about the EITC, a policy that both works and has some Republican Senators arguing that it need to be expanded. The data certainly shows its effectiveness:
Next to Social Security, the EITC combined with the refundable portion of the Child Tax Credit constitutes the nation’s most powerful anti-poverty program. These two credits lifted 10.1 million people out of poverty in 2012, including 5.3 million children (see chart). As AEI’s Michael Strain points out, the EITC “is a very effective anti-poverty tool because it supplements earnings and incentivizes employment. Expansions of the EITC have been very successful at encouraging work, particularly among single mothers during the 1990s.”
We were very vocal, in fact, arguing for a state EITC. The state tax credit was cut last year due to the tough budget situation from 30 to 25% of the federal refund. Governor Malloy has promised restoring the state EITC to 27.5% this budget year (and to 30% in 2015), and CAHS will work to ensure this program is restored.
CAHS, through our very successful VITA program, has also worked for years to make the help families get access to the program. You can learn more about our VITA program here - and get information on all sites in the state by calling 211.
There has been plenty of talk these past few days on how many jobs in our state and across the country simply do not pay enough. This was put into focus on a very stark, glaring way when one Wal-Mart in Ohio hosted a food drive for its own employees, seemingly oblivious to the fact that they needed this sort of charity because Wal-Mart is not paying them a living wage on the first place. That coming from a company that is spending $7.6 billion a year repurchasing its own stock to prop up share prices and make stock holders happy.
Leaving food drives aside, these low wages are also a drag on public budgets. Wal-Mart, as many other big employers, not only do not pay much to their workers, but also encourage them to apply for public benefits to fill the gap. Instead of offering a living wage, their workforce is forced to rely on SNAP (Food Stamps). Instead of providing health insurance, workers have to rely on Medicaid or Husky. As a result, a two-income working class family in Connecticut can end up receiving almost as much money in public, taxpayer-funded benefits as they receive in wages.
In our new policy brief, we have a look at the data to see who are these workers, and what is the cost for the state's budget. You can download the policy brief here. Worker's share of the national income pay has been steadily dropping for the past two decades. It is time to change this.