Malloy talks of surpluses while his new budget aims for a deficit

When animated television tyke Lisa Simpson had to announce a tax increase to the American public, she deftly called it a "temporary refund adjustment," avoiding any mention of the three-letter T-word.

Gov. Dannel P. Malloy's administration stole a page from The Simpsons last week, repackaging a projected deficit in his new budget as a conditional surplus -- all without using the D-word.

But while Lisa earned accolades from the fictional voters who only heard her mention a "refund," it remains unclear whether Malloy effectively steered the political debate -- and media coverage -- away from the $424 million hole his budget is headed for one year after it would take effect.

"I was left wondering what the hell had happened," Rep. Vincent J. Candelora, a North Branford Republican, said of the $20.7 billion budget Malloy offered for the fiscal year that starts in July. "I think they found a way to circumvent the open and transparent part of our budget process, and the public should be outraged."

Lisa Simpson

Lisa Simpson: An inspiration for the Malloy administration

 

But New Haven Democrat William Dyson, a retired lawmaker who co-chaired the Appropriations Committee for 16 years (under four governors) through 2004, said the budget presentation skillfully takes advantage of the legislature and media's optimistic tendencies when it comes to state finances. The more bad news that can be presented as good news, the better.

"The environment there has always been to turn your head and look away from anything bad," he said. "There's always been this notion that next year might be better and not something we need to worry about today."

Technically, the Powerpoint presentation used during the administration's budget briefing says that things are fine today, and getting better tomorrow.

The administration says the new budget would be modestly in balance in 2012-13. But after that, state government would enjoy a $226 million surplus in 2013-14 and a whopping $942 million balance in the final budget year of Malloy's term.

In actuality, if the administration's estimates for expenditures -- including the conversion to Generally Accepted Accounting Principles -- and revenues are compared, the budget is balanced only in its first year. There's a $424 million shortfall in 2013-14 and a $180 million hole in 2014-15 -- the same year Malloy's budget office projects a nearly $1 billion surplus.

How do the mathematical negatives become positives?

The administration also notes that the new budget is on pace to exceed the constitutional spending cap by $650 million one year after enactment, and by $1.1 billion two years down the road.

And if everyone assumes, the administration says, that it will cut spending back below the cap sometime in the future -- then the surpluses mentioned earlier would come to pass.

"How can you say your plan is sustainable if you count cuts you haven't made -- and aren't going to find for another year?" Candelora said.

Still, he added that "I think (Malloy) was successful from a press standpoint," noting that there was little reporting of any shortfall in initial print, broadcast and Internet coverage. Two Capitol reporters left the administration's briefing Wednesday noting that with projected surpluses like these, Malloy's budget proposal was heading for a "bipartisan love-fest" this session.

"I've never been optimistic about the media taking the time to pick it apart and understand it," Candelora said. "I think they do a good job at taking things and getting them at a 30,000-foot level, but I'm not sure that kind of analytical media exists any more."

While Malloy's budget agency, the Office of Policy and Management, argued that past governors' budget proposals routinely set a pace that exceeded the spending cap in future years -- the same is not true when it comes to deficits.

Of the past five gubernatorial budget proposals, only two were projected to fall into deficit by their second year:

The first came in February 2008. With Connecticut's economy just beginning to slide, Gov. M. Jodi Rell offered a plan that was headed for a $356 million shortfall one year later.

The second was Rell's more infamous February 2010 plan, which was headed in its second year into a $3.3 billion fiscal ditch -- a move Malloy repeatedly called irresponsible both during and since the last gubernatorial campaign.

"The purpose of Governor Malloy's 'shared sacrifice' last year was to fix that problem," said Senate Minority Leader John P. McKinney, R-Fairfield, referring to the huge deficit Malloy and lawmakers closed one year ago.

"But if you have a deficit approaching half-a-billion-dollars one year out, I think it's evidence you haven't fixed the problem. And I don't think most legislators are fooled," McKinney said.

McKinney said he thinks the deficit numbers were suppressed to keep talk of tax increases to a minimum until after the state legislative elections this November. "They are gambling that the economy is going to recover even faster and quicker than most people are predicting," he said. "I don't think any economists believe that is going to happen."

Malloy's budget director, OPM Secretary Benjamin Barnes, told lawmakers this past week that the administration isn't trying to hide the fiscal challenges state government faces.

"The governor has quite clearly articulated his intention to operate this year's budget and future budgets in the black," Barnes said. "We recognize this is a management challenge and we welcome it."

Dyson predicted that Malloy's budget message would resonate strongly with legislators, but more due to the governor's poise than to avoiding talk of deficits.

"I don't think the rank-and-file will pay a lot of attention to the deficit as long as the people with their finger on the pulse aren't worried," he said. "They trust all of the heavy hitters, and they will go along with what they suggest."

But while Malloy may be the heaviest of the "heavy hitters," Dyson said the fiscal holes in the Democratic governor's plan may require him to work more closely with legislative leaders -- albeit behind closed doors -- to keep any lingering fears of deficits quelled.

"You may hear some suggestions from (legislative) leaders that maybe we ought to be reducing some of the growth in this new budget to remove some of the risk," Dyson said. "It has to be done carefully, without looking like there is going to be a fight. But it can be done and it could even solidify the caucus more."

Much of the new spending in Malloy's budget is invested in shoring up the state employee pension fund, boosting education aid to cities and towns, and a modest rate hike for private, nonprofit social service groups.

Dyson added that a closer relationship between the governor and his fellow Democrats in the legislative majority also might be necessary to keep special interest groups from worrying about potential deficits.

The unidentified spending cuts Barnes insists the administration will make -- if necessary -- one and two years down the road are two and three times larger, respectively, than the new spending in the first year of Malloy's latest budget.

And the veteran Senate co-chairwoman of the tax-writing Finance Committee, Westbrook Democrat Eileen Daily, said it might be easier for all if some of the proposed spending is pared back.

"I think we have shown that the legislature doesn't have an appetite for spending cuts," she said, adding that if the plan is to spend now but cut more deeply in 12 months, it might be better to temper spending right away. "We know what a struggle it is" to make deep cuts.

"Obviously we all have our fingers crossed and hope that the budget gamble pays off," said James Finley, executive director of the Connecticut Conference of Municipalities.

But Finley quickly added that Malloy spared town aid from cuts while closing a huge deficit last year, and that he doesn't believe the governor would target those grants for cuts one or two years down the road.

"This governor showed remarkable sensitivity to towns and cities in the first two years of his term, and we would expect that would continue," he said. "Still, those budget projections are unsettling."

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