Rell, legislature, in one more fiscal showdown

With just seven weeks left in her term, Republican Gov. M. Jodi Rell is headed for one last fiscal showdown with Democratic legislators – with winter heating assistance for the poor hanging in the balance.

The governor wrote to legislative leaders Wednesday, warning them she would oppose borrowing the funding needed to maintain heating assistance at current levels. Rell urged the Democratic majority to find spending cuts in other areas of the budget to protect the Low Income Home Energy Assistance Program.

But Democratic leaders, who have balked at most of Rell’s proposed spending cuts in recent years, particularly those aimed at social services and health care, said Thursday that they remain hopeful the program can be kept functioning until Rell’s Democratic successor, Gov.-elect Dan Malloy, takes office on Jan. 5.

“I want to be very clear that I will not support additional borrowing to pay for the ongoing expense of the state’s heating program,” the governor wrote in a letter to the leaders of the legislature’s Appropriations, Human Services and Energy & Technology committees.

“My administration stands ready to work with you as you develop potential solutions to this problem,” Rell wrote. “In fact, we are ready to immediately begin helping you identify spending cuts in other areas of the budget that would free up funds to ensure that adequate heating aid is maintained.”

The governor did not identify any specific cuts in her letter.

The Rell administration warned the legislature last week that all of the federal funding distributed LIHEAP would be committed by early December or even late November, based on the income guidelines and benefit levels approved by those three legislative committees in September.

“The demand has been high and it is accelerating,” Office of Policy and Management Secretary Brenda L. Sisco told the Appropriations Committee on Monday. Originally the administration estimated $46 million would be needed to make up for declining federal aid, but that was changed this week to $33 million.

Though the governor wrote this week that “I will not tolerate even one person in Connecticut being forced to go without heat,” her solution back in September to the declining federal aid was to recommend changes that would leave an estimated 18,800 households ineligible, and would reduce benefits for thousands of others.

The state helped a record-setting 82,956 households pay their heating and other energy bills last winter through LIHEAP, according to the Department of Social Services.

The legislature balked at changing the LIHEAP guidelines or benefit structure, but also opted not to appropriate any state funds to offset the projected loss in federal money – hoping that Congress would authorize more resources than expected.

Since that hasn’t happened, one of the co-chairman of the Appropriations Committee, Rep. John Geragosian, D-New Britain, said this week that state lawmakers should consider coming into special session in the next few weeks to appropriate more funds to plug the $33 million gap.

The legislature and Rell originally approved up to $956 million in bonding, to be repaid with primarily through a new surcharge on residential and business electricity bills, to support this fiscal year’s $19.01 billion budget.

But because of a last-minute surge in the surplus projected for the fiscal year that ended last June 30, the administration estimated over the summer that this borrowing could be reduced to about $650 million.

Geragosian said Monday that even if the state also borrows closer to bolster the heating program, the total debt still would well below the original, $956 million target.

But Rell, who has been criticized for relying heavily on borrowing the past two years to avoid tax hikes and spending cuts, has been touting the reduced, $650 million borrowing target for several months. She also has been pressing state Treasurer Denise L. Nappier to borrow the funds now — though the fiscal year doesn’t end until next June 30.

Nappier wrote to Rell this week, noting that there are several factors she must consider before deciding when to bond, and how much of the $956 million authorization to issue.

In one letter she noted that a legal challenge to the borrowing, filed by state Sen.-elect Joe Markley of Southington, is pending. “Until this litigation is resolved, our ability to go to the market is questionable,” she wrote.

The treasurer also must consider when interest rates are likely to be most favorable to the state before issuing the bonds.

And though Nappier didn’t mention it in her correspondence, there also is a question as to whether the state budget will be in balance when Rell leaves office on Jan. 5. Though her budget agency reported a $300,000 surplus on Oct. 20, and it was certified by the comptroller’s office on Nov. 1, the legislature’s nonpartisan Office of Fiscal Analysis projected an $83 million deficit for the current budget this week.

If that deficit ultimately is confirmed, it also might drive the borrowing target upward, though still below the $956 million mark.

House Speaker Christopher G. Donovan, D-Meriden, and Senate President Pro Tem Donald E. Williams Jr., D-Brooklyn, both said Wednesday that LIHEAP must remain in operation, though they stopped short of calling for a special legislative session.

Both leaders said they were investigating whether the administration could transfer funds from other state Department of Social Service programs into LIHEAP with approval from the state’s Finance Advisory Commission. And then the legislature could address shortfalls in those other programs once the regular 2011 session starts on Jan. 5.

Malloy said this week that he hoped additional federal aid might be found after the new Congress convenes next year. And while Malloy didn’t address specifically whether he would appropriate more state funding to supplement heating assistance if more federal aid isn’t forthcoming, the Stamford Democrat said repeatedly throughout his campaign that he would not “shred the safety net” of social services to balance the state budget.

“Home heating assistance is critical to the safety and comfort of the Connecticut citizens who need the help the most,” Malloy wrote in a statement this week. “As governor, I will do everything I can to make sure that the lines of communication between Hartford and Washington are open and used often to help ensure the people who need our help the most aren’t the ones literally left out in the cold.”