Critics say Malloy stretched his fiscal promises with new budget plan

Gov. Dannel P. Malloy’s new budget-balancing plan tested several of his political promises, shifting spending onto the state’s credit card, ordering fare increases that one transit advocate called a “hidden tax hike,” and using a one-time subsidy savings from last year’s budget to cover ongoing costs in the current one.

Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, defended the moves, saying all of the new borrowing is related to capital programs and the cuts in transportation subsidies are not the equivalent of tax hikes.

Barnes did concede the one-time savings included in the plan likely wouldn’t comply with the transparent accounting principles state government will fully implement in 2013-14. But he also said that without that savings, the administration would have been looking at even more position cuts in a plan that eliminated funding for more than 6,500 jobs.

“The alternatives, we felt, were more harmful,” he said.

But Deputy House Minority Leader Vincent Candelora, R-North Branford and a member of the Finance, Revenue and Bonding Committee, said the Democratic governor’s moves contradict oft-stated pledges to avoid borrowing for operating expenses and one-time fiscal gimmicks, as well as Malloy’s recent insistence not to seek further tax hikes to replace the rejected union concession deal.

“It’s troubling to me that this new budget, this Plan B, would reflect that diverge from the philosophy” Malloy espoused both last fall on the campaign trail and since taking office in January, Candelora said, “It does certainly come down to a credibility issue now. What is the governor’s office principled on? It comes down to saying one thing and doing another.”

For example, Candelora said, Malloy appeared to ignore his own proscription against using one-time revenues for operating expenses when he announced $2.5 million savings the administration announced Friday in connection with service payments for Metro-North Commuter Rail Service.

On paper, the amount is relatively small: less than one-fifth of 1 percent of the $1.6 billion, two-year budget-balancing plan reported to the General Assembly, and about 1/100th of 1 percent of the $20.14 billion state budget for the current fiscal year.

What was significant, Candelora said, was the method the Malloy administration employed to find that savings.

State government makes payments in advance each month to subsidize service on the commuter line that links communities between New Haven and New York City. And Metro North resolves any discrepancies between the advance payment and the amount owed based on actual experience three months later.

That means any overpayment by state government during this past April, May and June – the last three months of the prior fiscal year – will be reconciled in July, August and September, after the new fiscal year has started.

Technically, the savings due to state government, which the administration estimates at $2.5 million, is tied to last fiscal year. But the governor’s plan uses that one-time savings to lower subsidy costs in 2011-12.

“We will not rely on ‘one-shots,’ decisions that apply one-time revenues to ongoing expenses, leaving future budgets high and dry,” the administration wrote in the “budget framework” of its annual fiscal presentation to the legislature last February.

Barnes said that after state government completes its conversion to Generally Accepted Accounting Principles in 2013-14, such a savings likely wouldn’t be shifted into a future fiscal year. But “we were trying to achieve our budget goals with both years in the biennium with the fewest amount of layoffs possible,” he said.

Malloy, who needed to replace $700 million in lost concession savings this year and $900 million in 2012-13, recommended over 3,600 layoffs and eliminated funding for more than 6,500 jobs in total on Friday.

That budget-cutting plan still might be recalled, though, since state labor leaders modified union bylaws on Monday to make it easier to adopt future union concession deals. Administration and union officials began talks Tuesday to see if another concession vote can be held.

Still, the one-time savings wasn’t the only questionable move in the recently balanced state budget as it now stands.

Malloy also vowed to break from his GOP predecessor, M. Jodi Rell, and not use state borrowing capacity to cover operating expenses. But his new plan indicates that borrowing now will fund more than $13.1 million  worth of items originally included in the operating budget approved for this year and next, including:

  • $8 million for bridge safety inspections.
  • $4 million to purchase equipment that supports highway and bridge repairs.
  • $791,087 for technology upgrades and related expenses in the Secretary of the State’s Office.
  • And $350,000 for highway planning and research.

“I think we’ve used the credit card too liberally over the years and I think that the governor appropriately attacked that lack of fiscal discipline,” said Candelora, a former ranking House Republican on the Finance, Revenue and Bonding Committee. I didn’t like it when the Rell administration did it and I don’t like it when the Malloy administration does it.”

“We are not going to leave the Department (of Transportation) without the ability to continue the bridge inspection program,” Barnes said, adding that all of the items now slated to be bonded are related to capital programs. We know we have huge needs for transportation as a state.”

The budget chief also said the administration actually has tried to reduce borrowing by paying cash for some transportation projects, such as nearly $27 million appropriated for Malloy’s new Pay-As-You-Go program.

The chair of the state’s watchdog agency for commuter rail service charged the governor Tuesday with violating his own pledge not to impose further tax hikes beyond the $1.5 billion adopted in May to help close a deficit for 2011-12 once projected as high as $3.67 billion.

“I consider this proposal a hidden tax increase,” Jim Cameron, chairman of the Connecticut Metro-North Rail Commuter Council, said of the $37.7 million cut over two years from the state’s subsidy for Metro-North and Shoreline East commuter rail services.

The administration acknowledged this would boost rates 14 percent on Shoreline and 15 percent on Metro-North. Cameron said that for the typical passenger purchasing a $300-per-month rail pass, that’s an extra $45 per month, or $540 per year.

“That’s a big chunk of change and there is no justification for a 15 percent increase other than that the governor can get away with it,” Cameron added. “It’s not because of increasing costs or improvements in service.”

The governor also cut subsidies for the CT Transit bus service, both for disabled and non-disabled passengers, a move expected to save $6.5 million over two years and boost fares by 10 percent. That would add $4.50 to the service’s $45 price for a 31-day pass.

“You can call anything a tax increase in one sense if you want to torture logic,” Barnes said, arguing that budget cuts have all types of impacts.

“If you look at the history of fare increases, Connecticut has been generally mild,” Barnes said, adding rail and bus service remain heavily subsidized and fares haven’t increased since 2005.