By Stephanie Kelly
NEW YORK (Reuters) - Connecticut Governor Dannel Malloy signed a $41.3 billion, two-year state budget into law on Tuesday, nearly four months after the start of the new fiscal year in July, but vetoed appropriations in support of a new hospital tax proposal.
His approval brings to a close the last and most contentious impasse among U.S. states that enacted late budgets for this fiscal year. He vetoed the previous budget lawmakers sent to him in September for fiscal years 2018 and 2019.
Pennsylvania Governor Tom Wolf on Monday signed a set of revenue bills to fund the state's spending plan passed by lawmakers on June 30.
In Connecticut, Malloy's signature provides relief to Hartford, the state's cash-strapped capital city. Its financial distress is a poignant source of anxiety for residents because it is in one of the wealthiest U.S. states.
Under the new budget, Hartford's finances will be placed under a municipal review board as it taps into at least $40 million in state aid. The measures will likely pull it back from what would have been the biggest U.S. Chapter 9 municipal bankruptcy filing since Detroit in 2013.
The budget also funds the state's full required contribution to its public pension systems and restores some funding cuts to higher education.
In addition, it revises a formula for education aid to municipalities, providing more to those with a higher portion of impoverished students and English language learners, Malloy said.
"While this may be a step in the right direction, make no mistake about it – this is by no means a perfect document and it is not one I would have negotiated," he said in a statement.
In particular, the budget closes a $3.5 billion two-year deficit by sweeping money from clean energy programs into the general fund.
"In the coming weeks, the administration will outline more specific ideas to address these cuts, avoid their immediate negative impact on consumers and ensure that Connecticut can maintain its commitments to clean energy investments in the energy marketplace," Malloy said.
He struck down a provision to increase hospital taxes, which would allow the state to get more federal Medicaid reimbursement, with the tax revenues to be returned to the hospitals.
Malloy said he supported the idea but that as written, the measure could lead to lawsuits and a $1 billion shortfall. He urged lawmakers to pass an alternative quickly.
(Reporting by Stephanie Kelly; Additional reporting by Hilary Russ; Editing by Diane Craft and Dan Grebler)