Governor’s initiatives not immune as deficits loom larger

Though Gov. Dannel P. Malloy is trying to see the fiscal glass as half full, key legislators tied to budget talks conceded this week that many of Malloy’s top initiatives may have to be scaled back, delayed, or cut altogether.

Though three fiscal offices confirmed a $200 million deficit in the current $20.1 billion budget — with just two months left in the fiscal year — that isn’t the legislature’s biggest problem.

Based on a new report downgrading revenue estimates for the third time since October, the $20.7 billion budget Malloy proposed in February for 2012-13 would amass close to $1 billion in cumulative red ink over the next two fiscal years.

And leaders of the legislature’s budget and tax-writing panels said Tuesday that means one thing: Find new places to cut spending, including the new education and social service initiatives Malloy proposed three months ago.

“Our work has been done as far as raising taxes,” Rep. Patricia Widlitz, D-Guilford, co-chairwoman of the Finance, Revenue and Bonding Committee, said, referring to more than $1.6 billion in state and municipal tax increases the legislature and governor approved last spring to close a record-setting deficit projected as high as $3.67 billion. “The heavy lifting was done last year.”

Malloy has been equally adamant about not going back to taxes this year. But the governor, who proposed $330 million in new spending in his February plan, said Tuesday that he thinks his big initiatives are still achievable, even in the face of growing deficit forecasts.

“There’s still a lot of money,” said the governor, adding that his administration and legislators can preserve his new initiatives by finding new spending cuts elsewhere.

More than two-thirds of the new spending Malloy wants next fiscal year centers on two areas: $98 million to shore up the state employee pension fund and $127 million for various education programs. The latter figure includes a modest $50 million increase in the $1.9 billion education cost-sharing system, the state’s single-largest municipal grant program.

Another key proposal of Malloy’s involves giving private, nonprofit social services that contract with state agencies their first rate hike in several years — a 1 percent increase starting in January.

“Education needs to be our priority,” Malloy added. “There’s a ways to go, but we’re going to make some cuts.”

Rep. Toni Walker, D-New Haven, co-chairwoman of the Appropriations Committee, agreed Tuesday that there need to be some cuts but added that the governor’s new initiatives, for the most part, can’t be shielded from the budget knife.

Walker conceded that it might not be possible to scale back the pension fix. That’s because contract language to implement the fix starting in July was negotiated and revised last winter with the State Employees Bargaining Agent Coalition and approved by the state Retirement Commission.

But everthing else, she said, has to be given a close look.

“We’re going to have to try to figure out what we can do now at low-cost and at no-cost, and some things will have to wait until the next biennium,” Walker said. “We have to look at all avenues of reducing the deficits we face.”

The New Haven lawmaker said she’s offering the same advice to those counting on receiving new funding proposed by the governor: “Right now we’re not promising anything.”

Malloy’s plan for 2012-13 was balanced for one year based on the administration’s own numbers released in February. For the fiscal year that begins July 1, 2013, that plan was on pace to run $424 million in deficit.

And then this week, the fiscal analysts for the governor and legislature reported that the state can expect $234 million less in tax and other revenue next fiscal year, and $311 million less in 2013-14.

Based on those numbers, the governor’s plan faces a shortfall of more than $220 million next year and a daunting gap in excess of $730 million 14 months from now.

Widlitz said she thinks that for many legislators, opposition to further tax increases will last longer than just this year. “We’re going to have to make some tough choices about spending,” she said.

But Rep. Vincent J. Candelora, R-North Branford, a veteran member of the Finance committee, said he believes Malloy and his fellow Democrats in the legislature’s majority won’t acknowledge the seriousness of current finances because this is a legislative election year.

“I think this governor is setting us up for more taxes in January and if we don’t do something now,” he said, “it’s a fait accompli.”

Malloy’s senior policy adviser, Roy Occhiogrosso, said Tuesday that while legislators need to remember that the new deficit projections are a mere fraction of those the governor inherited and tackled last year, the administration isn’t taking them lightly.

“We have a revenue problem, and we’re going to have to cut back in a few areas,” he said, adding that Malloy has made and continues to make structural changes to shrink government costs. “Governor Malloy manages for the long run.”