Lawmakers’ reluctance to continue spending cuts widens hole in next state budget

While legislators slashed spending last month to balance current finances, their reluctance to embrace those cuts long-term means the shortfall in the next state budget has grown yet again, according to a new report from nonpartisan analysts.

The legislature's Office of Fiscal Analysis projects that spending will outstrip revenues by $1.2 billion in the fiscal year that begins July 1, based on current trends, and the fiscal hole in 2014-15 now exceeds $1.3 billion.

That's up modestly from the shortfall projections of $1.14 billion for next year and $1 billion for 2014-15 that OFA released in mid-November.

The $1.2 billion gap, which is 6 percent of the current operating budget, also is roughly one-third the size of the historic, $3.7 billion annual shortfall that Malloy inherited upon taking office two years ago.

"OFA's projections for FY 14 reaffirm the challenge we face in the coming biennium," Malloy's budget chief, Office of Policy and Management Secretary Benjamin Barnes, said Tuesday.

That challenge could be considerably easier -- though still daunting -- if the governor's fellow Democrats in the legislature's majority support the same programmatic cuts in the next budget that they ordered for current finances just a few weeks ago.

Faced with a more modest, $365 million deficit in mid-November, Malloy and lawmakers eliminated all of that shortfall in two steps:

* The governor used his authority to order emergency budget cuts, whittling away nearly one-third of that deficit. Most of those reductions were aimed at social services and public colleges and universities.

* Then the legislature met in special session closing the remaining two-thirds, primarily with cuts in aid to hospitals and other social service programs, though lawmakers also raised new revenue by limiting business tax credits, cracking down on tax fraud and raiding a few one-time sources of funding such as account reserves.

 

But more importantly, the deficit-easing measure used a seemingly mundane technical move to send a strong fiscal message.

Rather than cutting spending by reducing specific line items in the budget, lawmakers temporarily gave the governor one-time authority to make the cuts for them.

The effect on programs this year was the same: Available funding was cut.

But the maneuver also told fiscal analysts: Don't assume these cuts will happen again next year.

And shortly after the deficit-mitigation plan was approved in December, fiscal analysts downgraded expectations for future state tax receipts for the fifth time in the past 16 months.

Still, if Malloy can convince legislators to make them permanent, the shortfall next year already is reduced by about 25 percent -- from $1.2 billion to something below $900 million.

But that will be no easy task.

Sen Toni R. Harp, D-New Haven, co-chairwoman of the Appropriations Committee, warned earlier this month that health care and social service programs -- already strained by surging demand in a sluggish economy -- cannot absorb many more cuts.

Harp, who represents one of Connecticut's poorest cities, also predicted that those who faced spending cuts in December, particularly Connecticut's hospitals, have supporters anxious to restore those reductions. "They are not going to be quiet" in the 2013 session, she said in early January. "They are going to make a major push to regain some of that ground."

Malloy, who is trying to avoid raising taxes after approving $1.5 billion worth of increases two years ago, must submit his budget plan for the next two fiscal years to the General Assembly Feb. 6.

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