Betting on federal aid to balance the budget suddenly looks riskier

Connecticut’s hopes of getting a balanced state budget for the next fiscal year may have been dealt a fatal blow by new warnings that nearly $366 million in proposed-but-not-approved federal aid is in jeopardy.

Top legislative leaders from both parties conceded Monday any failure to receive the anticipated, expanded federal stimulus aid for health care and child welfare programs would cripple efforts to balance a preliminary 2010-11 budget already believed to be $726 million in deficit.

“At this point I would say it’s very possible we won’t reach a budget agreement” before the regular 2010 General Assembly session ends on May 5, Rep. Cameron C. Staples, D-New Haven, co-chairman of the Finance, Revenue and Bonding Committee, said.

“Obviously there was a big gulp,” House Minority Leader Lawrence F. Cafero, R-Norwalk, said, describing his reaction to reports that the anticipated funding was uncertain. “At one point it all looked good. … If that money’s not there, we’re back to the drawing board.”

Cafero said his “gulp” came last week after the National Conference of State Legislatures sent out an “action alert” policy statement to legislatures across the country. The federal lobbying agency for state governments warned that legislation to increase emergency stimulus funds involving Medicaid and child welfare programs “that appeared to be a certainty just days ago is now on the ropes.”

The problem, according to NCSL, involves a new emphasis in Congress to ensure any additional emergency stimulus funding is balanced by new revenue or spending cuts. “The attitude has definitely changed,” Joy Johnson Wilson, the league’s health policy director, said Monday.

U.S. Rep. John B. Larson, D-1st District, whose post as chairman of the House Democratic Caucus makes him the fourth-highest ranking Democrat in the chamber, wouldn’t make the General Assembly any promises on Monday.

“Preserving local jobs and services during these difficult economic times is a top priority and I am working to secure the funding that I know the communities in Connecticut need,” Larson said. “However, until legislation is signed into law, I can’t guarantee it will be there for the state to utilize.”

The NCSL’s “action alert” warned that legislation to increase  Medicaid, child welfare programs and other stimulus-funded initiatives for states by $25.5 billion in 2010-11 had bogged down as neither the U.S. House nor the Senate has identified sufficient new revenues or cuts to fund them . “Basically it is stalled for now,” Wilson said, adding that the league is warning state legislatures not to count on that funding.

Gov. M. Jodi Rell has been relying since February on $365.6 million in proposed, expanded stimulus grants to balance the next state budget. Her $18.91 billion proposal for 2010-11 assumed $266.5 million in extra stimulus for Medicaid and child welfare programs and another $99.1 million in emergency aid for education. Wilson said the education stimulus expansion measure is in similar jeopardy as the proposed increase in health care funding, lacking sufficient revenue increases or spending cuts to balance it.

Legislative proposals don’t fare any better than the governor’s does if this potential aid doesn’t materialize. Both a revised budget passed by the Appropriations Committee and an alternative offered by minority Republicans in the General Assembly include the same $365.6 million that Rell had in her proposal.

Jeffrey Beckham, spokesman for Rell’s budget office, declined to comment Monday.

Cafero predicted two weeks ago that the state legislature’s nonpartisan Office of Fiscal Analysis would build the anticipated federal funding into its next revenue forecast for 2010-11. OFA and the governor’s budget office must issue a consensus revenue report by Friday, and legislative analysts also will release an independent assessment early next week.

“In every proposal it was speculative,” Cafero said Monday, adding he no longer is certain that funding will appear in future revenue forecasts. “You make your best guess based on evidence.”

The plans offered by Rell and legislative Republicans included no tax increases, while the Democrat-controlled finance committee endorsed a package of tax hikes, but neither side has offered a proposal that would balance the budget without the federal stimulus money.

“We’ve certainly had some revenue ideas and we could discuss some more,” Staples said Monday. “But I’m not sure enough people are ready to do that.”