Spent surpluses loom large against state’s budget deficit

State officials ordered as much surplus spending over the past 12 years as the entire deficit looming over the next fiscal year, according to a new report from nonpartisan legislative analysts.

Past and present governors and legislators spent $2.76 billion from surpluses as soon as they were available, and took another $696 million left over from annual budgets and allocated it to future budgets a year or two out.

candelora, vincent, 4-14-10

Rep. Vincent Candelora: ‘A bit shocking’


Those two allocations combined approach $3.5 billion, or 59 percent of the cumulative surpluses recorded since 1999, according to the annual Fiscal Accountability Report delivered last week by the nonpartisan Office of Fiscal Analysis to the legislature’s Appropriations and Finance, Revenue & Bonding committees.

Legislative analysts project that the next fiscal year, which begins July 1, faces a built-in shortfall of $3.67 billion, while the Executive Branch’s chief fiscal arm, the Office of Policy and Management, pegs it at $3.37 billion. The average, $3.52 billion, represents 18.5 percent of current spending.

The surplus analysis also shows that just under 40 percent of the cumulative surplus, or $2.32 billion, either was saved or was used to reduce or avoid debt. The remaining $96 million from the cumulative surpluses was returned to taxpayers in 1999 through an income tax rebate program.

“That behavior, unfortunately, does not surprise me,” said Rep. Vincent J. Candelora of North Branford, ranking House Republican on the finance committee. But he added that the extent of the spending “was a bit shocking. I think the overall gross number was a surprise. It really shows how those pennies add up.”

Michael J. Cicchetti, Gov. M. Jodi Rell’s deputy budget director, defended some of the surplus spending during a hearing last week, noting that most of the Rainy Day Funds were used to spare Connecticut from deeper budget deficits – and the tax hikes or spending cuts that come with them – over the past two fiscal years.

But Sen. Toni Boucher, R-Wilton, said that had state officials made tougher choices then, such as adopting a Republican proposal to pare most agencies’ spending back to 2008 levels, the huge budget gap looming just seven months away would be greatly reduced.

Republicans, who controlled just 37 out of 151 seats in the House over the past term and will remain in the minority with 51 seats starting in January, will nonetheless push again for reforms to force more saving and debt control, he said.

“If we don’t make corrections, history will repeat itself,” added Candelora, who favors limiting state government’s use of surplus to the same three options cities and towns are held to: savings deposits, debt reduction, or purchasing normally-financed capital equipment with cash to avoid debt and interest charges.

Fiscal reform advocates might have a new ally in Gov.-elect Dan Malloy’s administration in Lt. Gov.-elect Nancy Wyman, a Tolland Democrat.

Wyman, who has been Connecticut’s comptroller since 1995, has developed and won approval for legislation to expand the maximum savings allowed within the Rainy Day Fund. And last year lawmakers also agreed, at her request, to create a new, long-range savings account to cover an extra state employee pay period that arises every 11 years due to oddities in the calendar.

But more controversial proposals to deposit a portion of all surpluses into the pension savings account, or to create a new surplus savings program that would funnel the investment earnings back to cities and towns, still haven’t been adopted.

Malloy and Wyman both campaigned on a pledge to convert state finances to follow generally accepted accounting principles, and Wyman said during an interview this past week that the new administration is committed to weeding the fiscal gimmicks out of budget.