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Hartford (WTNH) – Governor M. Jodi Rell announced Monday that she has vetoed House Bill 7101, An Act Concerning the Estate and Gift Tax, and Senate Bill 2101, An Act Concerning a Deficit Mitigation Plan for the Fiscal Year Ending June 30, 2010, calling both bills further examples of the Democrat-controlled Legislature’s refusal to confront the reality of the state’s financial crisis by cutting spending.

Because the majority party in the Legislature is unable to make the needed cuts, Governor Rell said she is submitting legislation expanding the authority of Governors to make rescissions.

“Called into special session to deal with a budget deficit estimated between $337 million and $550 million, the Democrats in the Legislature managed to trim state spending by a feeble $12.4 million,” Governor Rell said. “It is a repeat of the same pattern we have seen time and again this year: Regrettably, it is an outright refusal to admit that state spending has far exceeded the ability of state taxpayers - any state taxpayers - to pay for it.”

The Governor continued to say that the Democrats want to move money around from one account to another and one fiscal year to another in the vain hope that increased taxes will fill the holes left behind.

“The increased taxes passed this summer have not produced the expected revenue - why do they think more taxes would change that? Homeowners and employers in Connecticut are not able to balance their checkbooks this way and they will not stand for lawmakers trying to do so. They are not taken in by legislative finger-pointing - nor are the state’s newspapers,” Governor Rell said.

The Day of New London editorialized Sunday, “[The] Democratic supermajority..continued its pattern of stall and denial by reducing expenditures by a mere $12 million, raising taxes by $76 million on the dead (and $130 million on the living) and telling Gov. M. Jodi Rell to clean up the rest of the mess.”

Meanwhile, the New Haven Register noted Monday, “The Democrats did next to nothing…The Democrats not only did not fix the budget, they made the problems for next year’s budget, already filled with one-shot revenues and unspecified borrowing, even worse.”

Governor Rell said she found numerous problem areas in S.B. 2101, noting that many of the proposed “savings” are likely to be unworkable. For example, the bill merges the Board of Firearms Permit Examiners into the Department of Administrative Services (DAS). But DAS has neither the staff nor the law enforcement authority to perform the firearms board’s work.

Similarly, the Office of Policy and Management (OPM) has raised concerns about the bill’s attempt to convert “disproportionate share” dollars - money paid to hospitals for treating uninsured and underinsured patients - into a Medicaid rate increase that would be matched by the federal government under the stimulus law. OPM notes that the federal government might not make the matching payment because the stimulus specifically exempts disproportionate share dollars from the enhanced match. Moreover, recharacterizing these funds on a temporary basis may raise concerns at the federal level.

“The reductions made in this bill are inadequate and many of the provisions expected to result in savings will not do so,” Governor Rell said. “The people of our state want their elected leaders to make a good faith effort to address the deficit and provide workable alternatives to current programs. It is simply unacceptable for the majority party in the General Assembly to nibble away at the problem without making the hard choices that our current economic reality requires.”

H.B. 7101 would postpone changes in the state’s estate tax that are scheduled to take effect January 1, effectively raising millions of dollars through additional taxes on the estates of those who die between January 1, 2010, and January 1, 2012.

“I have already made it absolutely clear that I will not accept legislation that seeks to close this budget deficit through new or higher taxes, or through additional borrowing,” Governor Rell said. “The General Assembly has become addicted to spending then taxing and borrowing to pay the bills for their extravagance. This approach is simply not sustainable. I cannot and will not support yet another tax increase, even a temporary one, at a time when so many of our residents are already struggling.”

Governor Rell said that the failure by Democrats in the Legislature to address the shortfall in the budget they passed just three months ago demonstrates that they are “simply incapable” of cutting state spending.

“If they are not willing to do what it takes to reduce government spending, then they must give me the power to do it by increasing the rescission authority of the Governor,” said Governor Rell.

Since the budget crisis began, the vast majority of the spending cuts that have been made have come through the Governor’s use of her statutory authority to order rescissions - generally, cuts in Executive Branch agency budgets - granted in Section 4-85(b) of the Connecticut General Statutes.

“The legislation that I have drafted does not give a Governor unlimited power to slash budgets,” Governor Rell said. “Writing and following a state budget is - and should remain - a balanced process, something that involves all three branches of government. But when the process - and the budget - is badly out of balance, as is certainly the case right now, someone must be able to restore that equilibrium. As Chief Executive of our state, it makes sense that a Governor have that authority.”

Under existing law, a Governor can make rescissions when a budget deficit exists that is greater than 1 percent of the General Fund. Current rescission authority is limited to up to three percent of the total appropriation from any fund or 5 percent of any appropriation.

Governor Rell is proposing that a Governor’s rescission authority be increased incrementally:

- to 6 percent of the total appropriation from any fund or 10 percent of any appropriation when a deficit of 3 percent or more exists

- Up to 10 percent of the total appropriation from any fund or 15 percent of any appropriation when a deficit of 5 percent or more exists

“These are modest - but necessary - changes,” Governor Rell said. “They will help ensure that the failure of the usual system for dealing with budget shortfalls does not wind up creating a lingering crisis or - worse - being solved on the backs of taxpayers with tax increases or ill-considered borrowing.”

The rescissions statute does not allow a Governor to cut aid to municipalities. In addition, as a practical matter, a Governor is constrained from cutting appropriations for entitlement programs or pension and health benefits for state employees and retirees - expenditures that comprise much of the budget.

Speaker of the House Christopher Donovan responded to the Governor’s veto of mitigation bills by saying, “Governor Rell’s veto is a clear signal that she places a higher value on protecting a new tax break on estates worth more than $3.5 million than closing this year’s budget deficit and protecting thousands of Connecticut jobs. The plan approved by the House and Senate balanced the state budget. Her veto is irresponsible and puts our state in financial jeopardy.”