Local projects threatened as state hits credit limit

One of the incumbents’ perks in a legislative election year, bragging on state funds won for pet projects in the district, is getting turned on its head this year.

Gov. M. Jodi Rell is asking legislators not only to hold off on new earmarks, but also to cancel projects that they have touted–but not yet delivered–to their communities.

Manchester Courthouse

A $50,000 study of expanding the Manchester Superior Court building is one of 330 projects facing possible elimination

The nearly $390 million in targeted projects largely avoids the highest priorities of Rell and the legislature, such as school construction, building programs at public colleges and universities, and highway and bridge repairs.

What is threatened are projects that get less attention in legislative debates, but are featured in many campaign fliers: historic building renovations, athletic fields, downtown redevelopment and everything else from beach sand in West Haven to an animal shelter in South Windsor.

Connecticut’s private, nonprofit social service agencies, and not just its cities and towns, also stand to lose millions of dollars as state officials grapple with projected deficits of historic proportions.

“There are things that are critical to the future prosperity and development of the state, and there are some things that are not,” Office of Policy and Management Secretary Robert L. Genuario, Rell’s budget director, said Monday.

The administration targeted 330 earmarks totaling $388.7 million in bonding given preliminary approval by the legislature – most between 2004 and 2009 — but that never received the final green light from the State Bond Commission. That panel, which is chaired by the governor, has sole authority to determine when, if ever, state government actually will finance most capital projects.

The reason for developing this fiscal hit list, the administration says, is driven by the numbers. The governor’s budget office estimates that total bonding – including projects that have received funding and those only given preliminary approval – would surpass state government’s allowable limit next fiscal year by $242 million. That limit, set by law, reduces the state’s capacity to borrow as tax revenues shrink.

And both Rell’s budget staff and the legislature’s nonpartisan Office of Fiscal Analysis have downgraded their expectations for tax receipts in 2010-11 by more than $340 million.

The governor could have proposed a smaller cancelation list and still hit the $242 million mark. But Rell wants to carve out some additional space for new borrowing to support new job creation loan programs and to develop a new data center for the Department of Information Technology.

And though the Republican governor’s proposed reductions are likely to spark an angry response from the Democrat-controlled legislature, Democratic leaders agree that many earmarks have to be canceled, said Sen. Eileen M. Daily, D-Westbrook. As co-chairwoman of the Finance, Revenue and Bonding Committee, Daily will be on the front lines when it comes to deciding which projects will survive, and which will not.

“Some of us have known for a while this was coming, and we have been looking at this,” Daily said Monday. “Some of these projects have been around for so long we know they aren’t getting done.”

She declined to identify specific projects that are likely to be targeted for cancelation by her committee, adding that the panel would be working on recommendations over the next several months.

But the Westbrook lawmaker added she’s prepared to cancel all $12 million worth of targeted earmarks within her district, which covers 12 communities in south-central Connecticut. That includes $10 million for an expansion at the Goodspeed Opera House in East Haddam, and $1 million to replace water mains in Portland.

“If we don’t have the money, we don’t have the money,” she said. “It’s my job to help them understand we don’t have the money.”

Daily conceded that asking legislators to cancel funding already promoted back home could be a nightmare, but smart lawmakers know better than to make promises when it comes to state dollars. “I’ve always told the people in my towns not to treat this as a sure thing,” she said “I’ve always said you do so at your peril. I hope people will understand what we have to do.”

So would Rep. Patricia Dillon, D-New Haven, vote to cancel $2 million reserved to repair flood-damaged homes in the Beverly Hills section of the Elm City? “The answer is: Never,” she said Tuesday, adding that Rell didn’t fail to tout more than $19.7 million in bonding her office distributed for municipal and regional projects in 72 communities last March through the Small Towns Economic Assistance Program. “How come the governor got to pour state money into Republican towns last year? How else am I going to help my district if I vote to get rid of this?”

Most of the projects targeted by the Rell administration are in Democrats’ districts. But Democrats control two-thirds of the House and Senate, and therefore reserve most bonding for their members.

Still, objections to the governor’s proposal were not limited to Democrats. Sen. John A. Kissel, R-Enfield, said he wouldn’t back Rell’s call to cancel the final $1.6 million reserved to help his town pay for a 2006 pollution remediation project at an Enrico Fermi High School athletic field. Enfield, which had received $1.7 million in state funds for this project two years ago, undertook the work with the expectation that the full $3.3 million ultimately would be released, he said.

“I don’t think it’s healthy to have promises that funds will be provided if, at the end of the day, they will not,” Kissel said Tuesday. “If this is what loyalty gets you — I’m very concerned about that.”

The legislature could solve its borrowing quandary simply by exempting the targeting bonding from the capping system. But it already took that route twice in recent years, exempting $2.3 billion in borrowing in 2007 to shore up the statewide teachers’ pension fund, and $1.05 billion bonded last summer to cover an operating deficit in the 2008-09 fiscal year, and Daily said state government needs to avoid carving out another exception.

A major Wall Street bond rating agency, Moody’s Investor Services, warned Connecticut last October that its healthy rating was in jeopardy due to its overuse of the credit card. Connecticut has more than $19 billion in outstanding bonded debt, and a report last year from the legislature’s nonpartisan Office of Fiscal Analysis ranked the state’s debt burden per capita as second-highest in the nation.

Rep. Ryan P. Barry, D-Manchester, said not all earmarks are created equal, and that the $4 million reserved between 2008 and 2009 to upgrade the Broad Street commercial area in his community doesn’t belong in the same category as soccer fields and beach upgrades.

‘This is really a no-brainer from an economic development standpoint,” Barry said Monday. “I’m fully prepared to defend these projects.”

Rell praised the Broad Street project two years ago, and Barry said he believes many of the earmarks on the governor’s chopping block could be valuable tools for growing jobs in a recession. “You can’t just take a blanket approach to this and say cut everything,” he said.

Similarly, Barry wants to retain $50,000 reserved three years ago to study a possible expansion of the Manchester courthouse. Given that Rell suggested closing that facility last year – a suggestion not adopted by the legislature – the Manchester Democrat said he won’t abandon a study that could demonstrate the need for that courthouse.

Just under 40 of the earmarks included in the governor’s proposal were reserved for private, nonprofit social service agencies, many of which contract with the state to serve the mentally ill, clients with developmental disabilities, abused children and others in need. These agencies appealed to the legislature two years ago to increase state financing for capital projects to help offset two decades of operating fund increases that haven’t kept pace with inflation. Now they stand to watch bonding dwindle as well.

“It’s like a double trap,” said Terry Edelstein, president of the Connecticut Community Providers Association, whose group represents 115 nonprofits that contract with state agencies.

For many of these nonprofits, state bonding would cover the cost of needed roof, heating and other maintenance work that has been deferred to offset shrinking state operating support, she said.

State government is expected to spend approximately $1.3 billion out of an $18.64 billion total budget this fiscal year to hire private, nonprofit agencies to provide the majority of state-funded social services. Though the adopted budget maintains funding at last fiscal year’s level, emergency cuts ordered by Rell in November could reduce funding for some agencies by as much as 2 percent.