House passes budget that closes $200 million deficit

The House of Representatives voted early Tuesday to approve a revised $20.5 billion budget for the next fiscal year that preserves most of Gov. Dannel P. Malloy’s initiatives for education and nonprofit social services while closing a $200 million-plus shortfall in current finances.

The budget, which passed the Democratic-controlled chamber on a 95-49 vote along party lines, drew fire from Republicans who objected to more than $70 million in combined raids of transportation and banking funds to prop up general fund spending.

The new spending plan, which would add $143 million to the original 2012-13 budget adopted last spring, includes no tax increases.

It would boost spending nearly 2 percent over this year’s level. And though the revised 2012-13 plan remains under the constitutional spending cap, the $86.4 million cushion is considerably less than the $278 million margin under the original budget for next fiscal year.

“We’re funding a major education reform initiative in this budget,” said House Majority Leader J. Brendan Sharkey, D-Hamden, who noted the deficit was just 1 percent of the total budget. “We are in sound fiscal shape.”

The revised budget salvaged nearly $90 million of the $127 million in new education initiatives Malloy proposed in February, including a $50 million increase in Education Cost Sharing grants to cities and towns. This modest increase marks the first growth in the $1.9 billion ECS program since the 2007-08 fiscal year.

The budget adds $7.5 million for the state’s 25 lowest-achieving schools, though the sum is significantly less than the $22.9 million Malloy proposed in February.

The governor’s plan had included financing for hundreds of new charter school seats in the state’s worst districts. The budget shaves his requested $2.5 million to $200,000. Existing charter schools will get a $1,100 per student boost in state funding, totaling $10,500 for each student.

Funding for 1,000 new preschools seats remains, though it will be phased in. The budget provides $6.8 million in new seats for 750 new preschool slots.

Another key program the governor preserved involves an extra $8.5 million to be shared by dozens of community-based, nonprofit agencies that contract to provide the bulk of state-funded social services.

The new budget also allocates $13.5 million to help balance finances, particularly to cover employee fringe benefit costs, at the University of Connecticut Health Center in Farmington.

And though the $8.5 million represents a 1 percent increase, starting in January, the nonprofit community said it is essential given that there’s been no increase in four years and little overall growth in more than a decade.

Both the governor and his fellow Democrats in the legislature’s majority were forced to scale back spending plans two weeks ago after executive and legislative branch analysts downgraded revenue expectations for the current fiscal year and the coming one.

The consensus report reduced revenue projections by $150 million for the current budget and by $234 million in the fiscal year that begins July 1.

To help offset tightening revenues, legislators trimmed spending in other social service and transportation programs.

The new plan forecasts saving $50 million by tightening eligibility and limiting nursing home coverage in a Medicaid program that serves poor adults who don’t have minor children. The changes include limiting enrollment to people with assets below $10,000, and counting family income in determining eligibility for applicants under 26. The program currently has no asset limit.

Another of the changes would restore the on-again-off-again increase in Connecticut’s commuter rail fares in January.

Malloy had ordered 4 percent increases in fares both for the current year and for next, but the legislature’s budget-writing panel had restored the $3.1 million in subsidies needed to cancel the 2013 increase. The tentative deal removes those funds, putting the rate hike back on pace for January. A similar fare hike in January  for transit bus fares, though, was cancelled.

But Republicans argued that most of the moves made to balance the next state budget amount to little more than fiscal gimmicks.

On the campaign trail two years ago, Malloy decried past administrations’ decisions to raid the special transportation fund to prop up non-transportation spending.

But the new budget draws more than $70 million away from transportation and into the general fund. Besides retaining the rail fare increase, the new budget also cuts funds for road repairs, borrows $30 million rather than using operating cash for municipal road repair grants and delays borrowing for infrastructure projects — all to offset the transportation fund raid.

Another $4 million in fees paid by the securities industry that normally are deposited into the state’s Banking Fund also would be diverted to support general government operations.

“We should just admit we are using gimmicks,” Rep. Sean Williams, R-Watertown, said, arguing that the revised budget contradicts the fiscal principles Malloy promised to adhere to on the campaign trail. “Nothing has changed.”

The bill adopted early Tuesday also would divert $222 million that had been dedicated to pay down the state’s credit card to help close a deficit projected to be as high as $285 million in the current budget. This move frustrated Republicans who argued that it — along with the municipal road repair grants put on the state’s credit card — violated Malloy’s campaign pledge not borrow to cover state operating expenses.

House Minority Leader Lawrence F. Cafero, R-Norwalk, said the more than $1.6 billion in new state and municipal taxes that Malloy and Democratic lawmakers ordered last spring to help close a huge budget deficit failed to provide the fiscal stability that was promised.

“We were told if we swallowed the medicine that things would be good, that it would ring in a new day,” he said. “But it’s just the opposite of that.”

But Sharkey responded that Republicans lacked the political stomach to vote for tax hikes that were necessary last year to close a historic deficit of more than $3.6 billion, a gap equal to one-fifth of all state spending. Given that, they have no standing to object to a shortfall in current finances of only 1 percent.

“Let’s please keep that in perspective,” Sharkey said. “Those of us who made the tough decisions a year ago can go to the people of Connecticut proudly a year later and say that the state of our financial condition in Connecticut is sound. This is a reasonable approach to deal with a relatively small problem.”

Final roll call

Democrats: 95 yes, 0 no, 4 absent

Republicans: 0 yes, 49 no,  3 absent