Downplaying deficit raises concerns among Malloy’s base

In an effort to shield himself from his Republican rivals, Gov. Dannel P. Malloy may have raised some new concerns about state finances among his political base.

The Democratic governor’s budget office demonstrated how a major budget deficit after the 2014 election could be cut almost in half — but only by continuing practices that unions, municipal leaders and social service advocates have decried for years.

“I think we’re trying to reflect reality,” Malloy’s budget chief, Office of Policy and Management Secretary Benjamin Barnes, told the legislature’s budget-writing panels late last month.

The Malloy administration raised many eyebrows recently when it used a new methodology to project a $612 million shortfall in the budget the governor must tackle three months after the November 2014 election.

The administration’s deficit is just over half the $1.1 billion, 6 percent gap projected by nonpartisan legislative analysts.

Barnes defended the smaller number, arguing that it reflects “current practices” at the Capitol, namely:

  • That state agencies can get by without a $305 million inflationary adjustment;
  • And that approved-yet-long-delayed increases in municipal aid can wait some more.

Barnes called it a “reasonable framework” for projecting costs in an economy that continues to lag far behind recoveries from earlier recessions.

The budget chief added that departments “will be able to offset any (lost inflationary adjustment) with efficiency and productivity.”

And cities and towns have watched legislatures and governors waive required increases in education and non-education grants for much of the past two decades.

Crying foul

Republican legislators quickly cried foul, accusing Malloy of trying to keeping a billion-dollar-plus deficit out of sight for fear that the fiscal “B” word would gather more media attention.

But in the first few weeks since the administration unveiled its new projection –- and the assumptions behind it –- Republicans aren’t the only ones who have taken notice.

“Whenever the governor’s budget office makes assumptions that would flat-fund programs that would impact cities and towns, that is a cause for concern,” said James Finley, executive director of the Connecticut Council of Municipalities.

“We continue to be very nervous that town aid will be on the chopping block because of the state’s budgetary woes,” said Betsy Gara, who heads the Connecticut Council of Small Towns.

Malloy has a good track record with municipalities.

The former Stamford mayor kept a campaign promise not to reduce education aid while tackling the $3.7 billion budget deficit he inherited in 2011.

During his tenure, the roughly $2 billion Education Cost Sharing grant program has grown by more than $101 million, and it’s slated to rise another $41 million starting July 1.

But Connecticut does not give school districts all ECS funds required by the program formula, and this broken system has been the subject of a long-running lawsuit expected to go to trial next year.

Does the Malloy administration’s forecast mean it doesn’t anticipate any solution to this crisis anytime soon?

Rep. Toni Walker, D-New Haven, co-chairwoman of the Appropriations Committee, called the administration’s forecast “a good wake-up call for some people,” adding that it’s likely state government can’t afford any major new spending for a while longer.

But it wasn’t just municipalities who showed concern with the administration’s assumptions about how a deficit would be avoided after the election.

Unions concerned

While Malloy repeatedly touts that the state workforce is much smaller now than it was under his Republican predecessors, the state employee unions that strongly backed him in 2011 still insist that many agencies are badly understaffed.

“It’s important for the governor and the legislature to maintain and ultimately strengthen the commitment to delivering the topnotch quality services people need, particularly in these tough economic times,” said Larry Dorman, spokesman for Council 4 of the American Federation of State, County and Municipal Employees.

Dorman, who represents one of the largest state employee unions, added that his group also believes officials need to ensure “that the ultra-wealthy and big corporations are paying their fair share of taxes. We’ve said time and again that you can’t cut your way out of a crisis.”

And when it comes to withholding inflationary increases for programs, the harm caused is more severe than some officials may realize, according to a New Haven-based social services advocacy group.

Education programs received one-quarter of state budget funds in 1992. Now they receive one-sixth.

Education and social services’ combined share of the budget fell from 40 percent to 30 percent over that period.

“Almost none of this happened because of a cut,” said Wade Gibson, senior policy analyst for Connecticut Voices for Children. “These programs were flat-funded, or they grew just a little bit, year after year after year.”

But they frequently failed to keep pace with inflation, Gibson added, and the numbers of Connecticut children living in poverty has grown.

“That’s the thing that we’re most concerned about,” he said. “The programs that go for kids just aren’t budgeted first. “

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