Malloy administration defends its deficit forecast

No one’s disputing that Connecticut’s budget is heading for a deficit after next year’s gubernatorial election.

The only question is how big it will be: $612 million? Or $1.1 billion?

Gov. Dannel P. Malloy’s administration defended its rosier view of state finances Monday, though it told lawmakers that major new spending must likely be postponed for at least two years.

But Republicans on the legislature’s budget panels argued that the forecast ignores inflationary and other costs to minimize the deficit awaiting Connecticut after the 2014 state elections.

“We attempted to provide an estimate which reasonably captures the challenge we face,” Office of Policy and Management Secretary Benjamin Barnes, Malloy’s budget chief, told the Appropriations and Finance, Revenue & Bonding committees during a joint meeting.

Barnes’ office estimated Friday that the state is on pace to run a $612 million shortfall in 2015-16 — the first fiscal year after the gubernatorial election. That’s a gap of 3.3 percent.

At the same time, the legislature’s nonpartisan Office of Fiscal Analysis pegged the post-election shortfall at $1.1 billion, or 6 percent.

Barnes’ office didn’t count a $305 million inflationary adjustment used by the nonpartisan analysts, nor about $124 million worth of town aid increases required by law.

The budget director noted that legislatures and governors haven’t built across-the-board inflationary increases into agency budgets in more than two decades. And mandated hikes in town aid are waived year after year — with the deficit otherwise stretching beyond $1 billion, it was realistic to assume lawmakers would withhold these funds once again.

“I think we’re trying to reflect the reality,” Barnes said, adding that failing to take this approach would lead to a state budget “that would entail large tax increases.”

But Republican lawmakers argued that the Democratic governor’s budget office was motivated more by politics than by fiscal prudency in its latest forecast.

Fiscal analysts for both the governor and the legislature used to include inflationary adjustments and statutory town aid levels in past deficit forecasts.

“Why now have you made that change?” Rep. Jason Perillo, R-Shelton, asked Barnes, who again insisted his office concluded this was the most accurate assessment of the post-election deficit.

Malloy hasn’t launched a campaign but all indications, including his participation in various party fundraisers, are that he is running.

Rep. Vincent Candelora, R-North Branford, a veteran member of the finance panel, called the administration’s new forecast “more of a wish list.”

Even if lawmakers ultimately choose not to increase agency budgets or grants to towns after the election, they still need to know the cost of these initiatives, Candelora said.

The top House Republican on the Appropriations Committee, Craig Miner of Litchfield, drew a parallel with 2009, when Republican Gov. M. Jodi Rell’s administration avoided proposing tax increases by forecasting a much milder recession than Connecticut ultimately faced.

The Democratic-controlled legislature responded by enacting a requirement — over Rell’s veto — that budget analysts for both branches develop consensus revenue reports three times annually.

“Maybe we need to take some action to centralize the decision-making process” in forecasting deficits, Miner said.

Leaders of the Democratic-controlled budget panels backed the administration’s decision.

Rep. Toni Walker, D-New Haven, said later that while state finances are much better off than when Malloy inherited an 18 percent budget shortfall in 2011-12, Connecticut can’t afford any major new spending yet.

“When we know we can’t afford it, why not say it?” she said.

“That’s reality, folks,” said Sen. John Fonfara, D-Hartford, who co-chairs the finance panel.

 

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