Big health care savings help counter shrinking state budget revenues

State officials trying to close a last-minute hole in the next budget got some good news Wednesday in the form of major savings in health care costs for retired state employees.

The Legislature’s nonpartisan Office of Fiscal Analysis issued a memo indicating it has reduced its projected cost of providing health care to retired state workers in the fiscal year that begins July 1 by $140.6 million, and in 2014-15 by $166.5 million.

The nonpartisan office is boosting the projected health care costs for current employees by $46.7 million in the next budget and by $36.4 million in 2014-15, but the net savings over the next two years still totals $224 million.

State Comptroller Kevin P. Lembo, whose offers administers health coverage for state employees and retirees, also is projecting a savings.

“We agree that the costs for health care over the next two years will be lower than initially projected,” he said Wednesday. “This is the result of recent lower health-care cost trends. We also recently negotiated better pharmacy pricing that takes effect June 1. As a result of these factors combined, the state’s actuaries reduced our projected overall health-care spending for the next two fiscal years.”

State government will spend nearly $1 billion this fiscal year to provide health care to workers and retirees, with each component representing about half of the total cost.

Together this expense represents 5 percent of the state’s entire annual operating budget.

The newly projected savings of $224 million would cover nearly half of fiscal problem that cropped up two weeks ago when OFA and Gov. Dannel P. Malloy’s budget office scaled back their expectations for revenues in the next biennial budget.

The consensus report reduced revenue projections by $259 million for next fiscal year and by $229 million for 2014-15, or $488 million over the next biennium.

House Minority Leader Lawrence F. Cafero, R-Norwalk, said the unanticipated savings should be used to spare consumers from an unnecessary summer tax hike.

Malloy’s budget relies on about $60 million from a major increase in the state’s wholesale fuel tax.

Starting July 1, that tax would jump by one-sixth, from 7 to 8.1 percent. Based upon current wholesale prices, that would add more than 3 cents per gallon to the price of gasoline.

Though the tax would raise $60 million per year -– according to nonpartisan analysts -– the governor’s budget effectively redirects all of that revenue for non-transportation programs.

Cafero and other critics charge that if the transportation fund is not raided, the tax hike is unnecessary. The latest projected savings only underscores the need to cancel that tax increase, the minority leader said.

“There is no excuse not to eliminate the gas tax hike,” he said. “… Now we just need the leadership and political will to give Connecticut drivers and businesses the break they deserve.”

Malloy and his fellow Democrats in the Legislature’s majority have said Cafero’s criticism is hollow, since Republicans in neither the House nor the Senate have offered a plan to balance the next state budget.