Connecticut has a projected $3.5 billion dollar budget deficit and Governor Dan Malloy has proposed a two year budget with tax increases to generate the revenue needed to close the gap.

But State Rep. DebraLee Hovey (R-112) is among Republicans who maintain "the state does not have a revenue problem. It has a spending problem." She and State Sen. Kevin Kelly (R-21) support a Republican alternative that includes no tax increases.

The two legislators held a public forum on the state budget at Monroe Town Hall earlier in the week to share their views on the issues and to solicit input from the citizens they represent.

"We are bringing the message of fiscal responsibility," Hovey said. "The Republican alternative is a blueprint to ending Connecticut's out of control spending and helping to prevent the future crisis."

The Republican plan includes eliminating 1,380 state jobs.

Kelly said, "What we're trying to do is right-size government to the population and economy of Connecticut and live within our means, which is something we do around our family's kitchen table."

The two legislators criticized the governor's plan for proposing "the largest tax increase in state history" while still allowing spending to go up from the current $19.3 billion budget to $19.7 billion in the first year and $20.2 billion in the second.

Tax increases include the sales tax and taxes on gas, boats and aircraft, hotel rooms, alcohol, cigarettes, insurance companies, real estate sales, the inheritance tax, and a 20 percent corporation surcharge, according to Kelly and Hovey's presentation. There would be a $25 fee for driver's license renewal and a reduction in the property tax credit.

There would be new taxes on services including pet grooming, manicures and pedicures, clothing and footwear under $50, non prescription drugs and car rentals to name a few.

Kelly said it amounts to $1.5 billion in new taxes.

Income tax makes up about 33 percent of the state's revenue and Hovey said Fairfield County taxpayers pay for about half of the total. Kelly said the top 10 percent of tax filers represent almost 60 percent of the state's income tax revenue. But he cautioned against raising taxes on Connecticut's wealthiest citizens.

"We need to keep in mind that the wealthy often times have homes in other jurisdictions other than the state of Connecticut and that it's very easy to change a domicile from Connecticut to Florida, as has been done in the past," Kelly said. "And if we did that, you could lose as much as 60 percent of your income tax revenue if that 10 percent were to leave the state."

The Cost of Doing Business

Kelly and Hovey's presentation included the following statistics: Connecticut has the highest total state and local taxes per capita in the nation ($7,007), the second highest unfunded pension liability ($4,500), the fourth highest state debt per capita ($7,882), 45 states have fewer health insurance mandates, and Connecticut has the second highest gas taxes and the second highest electricity costs after Hawaii.

Expansion Management magazine voted Connecticut the least business friendly legislature and the Milken Institute said the state has the fifth highest cost of doing business.

"Since 1990 our economy has not added a new job," Kelly said. "We've created jobs, but we don't have more jobs than we did 20 years ago. There's only one other state that's performed worse than Connecticut and that's Michigan. And we all know what's happened in Michigan with the auto industry. Connecticut has just been a very poor place to do business."

Kelly said regulations on health insurance leads to higher premiums for small businesses who provide coverage for their employees, further increasing the cost of doing business.

What the GOP Proposes

State Republicans are proposing a $1.5 billion reduction in spending from the governor's plan and for no borrowing for day-to-day operations. They would also fully restore the property tax credit for homeowners and preserve aid to cities and towns at current levels.

Hovey said Malloy's budget would reduce aid to Monroe by about $150,000.

Through consolidating 36 state agencies into nine, Kelly said 383 positions could be eliminated saving $18.9 million in 2012 and $27.6 million in 2013. Increasing the ratio of managers to workers from one to six to one to 12 and eliminating duplication would lead to a reduction of about 1,380 positions, according to the GOP plan.

It would save $112 million in 2012 and $138 million in 2013, the plan says.

Kelly said he did not know if the cost of unemployment and other benefits for those who lose their jobs was factored into the savings.

Elimination of vacant positions would save $10.8 million over two years, and the GOP plan includes a hard hiring freeze, elimination of longevity payments, and labor concessions (the $2 billion projected in the governor's plan over two years).

The Republican proposal also includes mandate relief and privatization.

Among some of the mandates are elimination of Race to the Top requirements, a delay in school suspension requirements, limit unemployment benefits of part-time workers, binding arbitration reform, raising the threshold for prevailing wage requirements and to permit red light cameras.

Republicans also want to privatize Riverview Hospital, DMV registrations, prisoner health care, DEP parks maintenance, the Department of Social Services' program intake and applications, and Bradley International Airport.

Public Discussion

During a question and answer period after the presentation, Joe Sullivan asked what will happen if Governor Malloy does not get the concessions he's asking unions for.

Kelly said the state would either have to raise taxes, cut spending or come up with a revenue gimmick. But he added that the governor is confident the union will agree to the $2 billion worth of concessions.

Brian McClain asked why the state government does not tell departments it's cutting spending by 10 percent, for example, and have the managers find the savings. "That's how businesses do it," he said.

"We didn't want to be so meat cleaverish and cut," Kelly said. "We wanted it to be targeted. Our alternative doesn't raise taxes."

The senator said the government only looks to cut programs or raise taxes rather than trying to find ways to provide the same services for less. That is why he contends more privatization is needed.

Tom Taylor, who is a Board of Education member, praised Hovey and Kelly for hosting the forum and asked them to push for elimination of the conveyance tax on the purchase of homes — which he called discriminatory — by allowing it to sunset.

One resident asked Hovey and Kelly what they would do to close the gaps in state employee and teacher pensions, which are underfunded by billions of dollars.

Kelly said it would go bankrupt within eight or nine years if nothing is done and some members of the audience could be heard saying, "Let it!"

The senator said unions are fighting reforms.

When asked about the chances of the Republicans' alternative budget passing, Hovey said Democrats no longer hold a super majority in the Legislature and will have to work with the minority party.

Kelly said, "DebraLee Hovey and I will go to Hartford and fight for that alternative budget to pass."