State enters new budget with modest fiscal cushion

Gov. Dannel P. Malloy will have a modest fiscal cushion at his disposal as he enters the final two-year budget of his term next week.

Based on a report Wednesday from nonpartisan legislative analysts, state government could hold just over $150 million in its emergency reserve, commonly known as the Rainy Day Fund, when it closes the books on the 2012-13 fiscal year.

That represents nearly 1 percent of the operating budget for the new fiscal year, which starts Monday.

“The bottom line is that the budget is better-than-balanced and further evidence that, despite what our critics claim, the state is indeed on the right fiscal path,” Gian-Carl Casa, spokesman for the governor’s budget office, said.

The legislature’s Office of Fiscal Analysis now is projecting a $279.9 million surplus for the soon-to-end fiscal year, an improvement of $59 million from its forecast last month when lawmakers adopted the next state budget.

Legislators and the governor agreed to use $220 million from any surplus to help support spending in 2013-14 and 2014-15.

If nonpartisan analysts are correct, the $59 million in additional surplus would be deposited into the Rainy Day Fund, which already holds $93.4 million.

The nonpartisan report is very similar – even a little rosier – than the $236.6 million surplus projection the Malloy administration issued on June 20.

The next official budget assessment is due Monday from state Comptroller Kevin P. Lembo.

Malloy and lawmakers struggled with modest deficits throughout much of the last fiscal year, holding a special session in December to close the $365 million shortfall projected at that time.

Surging demand for state-sponsored social services, particularly health care, coupled with income and sales tax receipts that failed to meet projections created much of the red ink.

But legislative analysts noted in their latest report that enrollment growth finally slowed in May in the Medicaid for Low Income Adults program.

LIA, which provides health care to working poor adults without minor children, has been one of the fastest growing social service programs in the state budget.

Malloy, a Democrat, and Republican legislative leaders, have battled to define the new two-year state budget in the eyes of voters.

The governor insists there are no new taxes, and notes that the plan falls under the constitutional spending cap while continuing the conversion of state finances to Generally Accepted Accounting Principles.

But Republicans counter that the plan extends several tax hikes that were supposed to expire, and relies on a new interpretation of Medicaid spending that shifted more than $6 billion off the books in order to comply with the spending cap.

And while gasoline and diesel taxes are scheduled rise next week -– both by about 4 cents per gallon -– according to statutes passed before Malloy became governor, the new budget effectively siphons off nearly all of the funds they would raise at the pumps for non-transportation programs.

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