Malloy dips heavily into fiscal cushion to avoid more budget cuts

Gov. Dannel P. Malloy recommended Friday that lawmakers significantly reduce the surplus already built into the next two fiscal years rather than impose deeper cuts in the $40.11 billion biennial budget adopted earlier this month.

To close a $300 million in gap in next year's budget left by the tentative union concession package, Malloy proposed cutting just $40.6 million--and more than half of that comes from controversial, newfound savings in retiree health care benefits.

In a two-page summary of the budget reconciliation proposal he will deliver to the General Assembly on Tuesday, the governor recommended using $259.4 million of the projected surplus for 2011-12 fiscal year to fill the rest of next year's gap.

Similarly, the governor would use another $59.7 million in surplus to close a $100 million gap in 2012-13, also tied to the concession deal.

The biennial budget, which would spend $19.83 billion next fiscal year and $20.29 billion in 2012-13, featured unprecedented built-in surpluses of $371 million and $638 million, respectively.

But that also hinged on an assumption that the governor would strike a wage- and benefit-giveback deal with unionized state employees worth $1 billion each year. The deal Malloy and the State Employees Bargaining Agent Coalition subsequently announced, though also unprecedented in size, is reportedly worth $700 million next year and $900 million in 2012-13.

The adjustments Malloy proposed, if adopted by the legislature, still would leave the state budget projected to run iin the black for the next two fiscal years by $111.8 million and by $578.1 million, respectively for a two-year total of just under $690 million.

Republican lawmakers, who already have blasted the governor and his fellow Democrats in the legislative majority for adopting $1.5 billion in new state taxes next fiscal year, charged Friday that Malloy should have trimmed spending more in his adjustment plan.

"Classic Malloy. He says one thing and does the other." said House Minority Leader Lawrence F. Cafero, R-Norwalk, who charged Malloy initially pledged to use spending cuts to fill any gap if labor savings fell short of the projected concession target. The built-in surpluses, which surpass $1 billion in total over two years, were created largely by one of the largest tax hikes in state history, Republicans said.

"This is obviously, unfortunately, what we have predicted all along," Senate Minority Leader John McKinney, R-Fairfield, said. "The governor has not been interested in spending cuts."

But Office of Policy and Management Secretary Benjamin Barnes said the governor never promised to rely exclusively on spending cuts to fill any gaps in the labor savings target. "The governor committed not to raise taxes any more than he originally proposed in his budget," he said, "which I believe is a promise he maintained."

Barnes added that this budget adjustment plan allows the administration to avoid further cuts to social services  and to municipal grants. "This is the most responsible way for us to bring the budget into balance," he said.

Sen. Toni R. Harp, D-New Haven, co-chairwoman of the Appropriations Committee, also gave a preliminary endorsement to the budget adjustment outline released Friday.

"This budget adjustment does little to hurt anyone," she said. "I think we can work with this."

More than half of the spending reductions Malloy offered, $25 million out of $40.6 million in the first year and $27 million out of $38.1 million in 2012-13, are tied to the account that funds health care for retired state workers.

Comptroller Kevin P. Lembo reported earlier this month to Malloy's budget agency that this year's $595 million account for retiree health care benefits was expected to come in $117.4 million under budget.  In April, the comptroller's office had projected a savings of just $16.9 million. Lembo said this week that at least a portion of that savings likely was to be available again in the next budget.

Deputy House Minority Leader Vincent Candelora, R-North Branford, questioned whether trends that could produce a $117.4 million savings could develop in just one month, or whether the comptroller and administration failed to report a huge savings until after the next budget had been adopted.

"This kind of lapse does shock me," he said Thursday. "We are squirreling away a lot of money."

Other cuts proposed by Malloy include:

  • $7.2 million each year from a fund to support cooperative ventures between school districts.
  • $3.65 million in each year from the Workers' Compensation Fund.
  • $2.5 million in 2011-12 to reflect projected savings in medical services for prison inmates.
  • $2 million in 2011-12 from the University of Connecticut Health Center's operating block grant.
  • $201,317 each year from reduced use of natural gas.