New budget postpones hard decisions

The countdown to state government’s real fiscal storm began late Wednesday, just 10 minutes before the gavel closed the 2010 legislative session.

That’s when lawmakers wrapped up a revised $19.01 billion budget that avoids official tax hikes but places a new surcharge on consumer electric bills, borrows nearly $1 billion, raids an already weakened workers’ pension fund – and took other measures to avoid severe fiscal pain now while leaving a $3.4 billion problem for Connecticut’s next governor and legislature to solve.

Gov. M. Jodi Rell, who is not seeking re-election, pledged at 6:18 p.m. to sign the budget, roughly five hours before the House of Representatives guaranteed it would reach her desk with a 93-57 vote.

The Republican governor’s support, pledged in a joint statement also signed by leaders of the Democrat-controlled legislature, was part of an elaborate deal that also included legislative confirmation of her judicial nominees – but ignored a mammoth-sized deficit looming 14 months away, Republican legislators charged.

budget 5-6-10

“For the last few weeks we have worked together in a respectful and productive manner to address Connecticut’s unprecedented fiscal challenges,” wrote Rell, House Speaker Christopher G. Donovan, D-Meriden, and Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn. “We are pleased to announce that we have reached agreement on a revised budget that fully balances the budget without raising taxes, cutting municipal aid or harming needed social services.”

The governor and legislative leaders’ statement added that “The budget plan also includes tough spending cuts that will reduce borrowing so as to save money in future fiscal years. We urge legislators to support the budget bill and help Connecticut continue its economic recovery. We look forward to swift passage of this budget and it being signed into law.”

But Republican lawmakers did not share this rosy assessment.

“We are still stuck with a massive hole,” Senate Minority Leader John McKinney, R-Fairfield, said shortly before the chamber wrapped up a nearly four-hour debate by adopting the budget 19-16. As would be the case with the House later, the Senate voted largely along party lines with a few Democrats joining the Republican opposition.

“In football terms, we are punting,” said Sen. Daniel Debicella of Shelton, the ranking Republican senator on the Appropriations Committee. “We are punting to the next legislature.”

What legislators and Rell are punting, according to Debicella, involves a $3.37 billion deficit projected by the legislature’s nonpartisan Office of Fiscal Analysis, for the 2011-12 fiscal year.

That shortfall equals 18 percent of the entire current budget, and 51 percent of this year’s projected income tax receipts.

The revised budget eliminated the original’s controversial securitization plan – involving the discounted sale of $1.8 billion in future state revenues in exchange for $1.3 billion to balance the spending now –  but replaced it with another form of borrowing.

Taking advantage of recent, modest increases in state revenue forecasts as the economy begins to show positive signs, Democrats and Rell reduced the $1.3 billion target just below $1 billion, then agreed to cover that through sale of revenue bonds to be financed over eight years.

To cover the $136 million in annual debt service, lawmakers ordered a surcharge on electric bills, about $2.50 per month for the average household, and agreed to strip $29 million per year from an energy conservation fund that supports thousands of private-sector jobs tied to energy-efficient home improvement work.

House Republicans offered an amendment to avert the “hidden tax” surcharge, arguing that with further spending cuts, and more than $800 million to be raised by selling Bradley International Airport in Windsor Locks and Hartford-Brainard Airport, borrowing would be unnecessary.

It was rejected 113 to 37 in a party-line vote.

“I’ve heard it’s not our fault, that  this deficit was caused by a worldwide economoc crisis,” House Minority Leader Lawrence F. Cafero, R-Norwalk, said after the House GOP amendment failed. “I’m not so sure about that… Did we change the way we do business? I don’t think so.”

It wasn’t just Republicans criticizing the new budget.

Rep. Shawn T. Johnston, D-Thompson, who is retiring from the legislature after this term, called it a mistake to cut next fiscal year’s recommended contribution to the state employee pension fund by $100 million. Contributions due this fiscal year and last already have been reduced by a total of $214.5 million.

The concession package ratified by state employee unions last year allows the 2011 pension fund payment to be cut another $100 million, but only if and after tax revenues are found to be in decline in the midst of the next fiscal year, Johnston said. “I’m not even sure if we can legally do this right now,” he said.

But Williams argued during the earlier Senate debate that Democrats and “our good friend Governor Rell” were not ignoring the future.

The revised budget spends $73 million more than the preliminary $18.93 billion budget adopted last September for 2010-11, and avoids deep cuts to social service, health care and education programs that residents still need greatly on the heels of a recession, he said.

“There’s more to do and we’re prepared to do it,” he said. “But today we got the job done for 2011.”

“It’s not perfect, it’s never perfect,” said House Majority Leader Denise W. Merrill, D-Mansfield. “But this does the job.

“I’m very proud that we didn’t let people down during this terrible time,” she said, adding that key services were preserved while a $726 million projected deficit for 2010-11 was eliminated. “We didn’t abandon them.

Democrats noted that the new budget plugs leaks that sprung up in this year’s finances.

The revised plan boosts spending 1 percent over projected levels for the current year. That adopted budget included $18.64 billion, but legislative analysts said cost overruns in more than a dozen agencies will push overall spending beyond $18.8 billion before the fiscal year ends on June 30.

That problem stemmed in large part from unprecedented levels of undefined savings built into this year’s budget, and the preliminary plan for 2010-11. The administration was supposed to find nearly $500 million in savings this year, but the budget is facing $144 million in projected cost overruns.

Hoping to avoid a repeat of that problem, the revised budget dramatically reduces the undefined savings – or lapse – target for next year, from $552 million to $356 million.