Budget panel fills Malloy’s gap, boosts social services

One week after a $70 million hole was uncovered in Gov. Dannel P. Malloy’s budget proposal for 2014-15, the legislature’s Appropriations Committee  increased spending for social services while using surplus funds to close the gap.

The Democratic-controlled committee approved a $19.04 billion budget proposal Thursday for the fiscal year that begins July 1 with a 26-19 vote along party lines. The committee plan adds $12.3 million to Malloy’s bottom line and would boost spending in the General Fund – the bulk of the operating budget — by $406 million next fiscal year, or 2.4 percent.

Most of that additional spending is for health care and other social services.

The panel recommended using about $60 million in unspent Medicaid and other funds in the current budget to plug most of Malloy’s shortfall.

The Appropriations Committee’s proposal addresses only state government spending in the new fiscal year. The other half of the legislature’s budget proposal — taxes, revenue and borrowing — is being crafted by the Finance, Revenue and Bonding Committee. That group, which still must act on Malloy’s controversial proposal for a $55-per-person tax rebate this fall for low- and middle-income households, is expected to finish its work Tuesday.

The spending plan unveiled Thursday reflects “what we heard from the people of Connecticut,” said Sen. Beth Bye, D-West Hartford, co-chair of the committee. “People are hurting.”

The panel added $12.5 million for municipal aid above the governor’s plan, including $7.5 million for school districts. But, like Malloy, the committee ignored a $19 million hole in funding for magnet schools.

The committee budget funds 443 new state positions – 37 more than the level sought by Malloy – while adding $2 million for private-sector youth employment and job-training programs.

Rep. Toni Walker, D-New Haven, the committee’s other co-chair, said the youth employment and job training were crucial, not just for Connecticut’s largest cities but for suburban communities as well.

“This was not just a Democratic budget,” she said, adding that “we had lots of input from all members.”

Not ‘hunky-dory’

But Republican legislative leaders charged that the plan is plagued with gimmicks.

Malloy had employed a loophole in the spending cap system to propose an extra $60 million for the state university system. The committee plan builds on that, increasing the higher education funding off budget — or, one-time spending that circumvents the budget cap — to $65 million.

That maneuver, coupled with the committee’s use of surplus funds, is part of a big deception hiding a fiscal crisis in state government, GOP leaders charged.

“We tell the public everything’s hunky-dory, but it’s not,” said Deputy House Minority Leader Themis Klarides, R-Woodbridge.

“The only way to pay for the continued spending that’s taken place in this budget is through new taxes,” said Sen. Robert Kane of Watertown, ranking GOP senator on the Appropriations Committee, who predicted the tax hike would come next spring — after this fall’s state elections.

Nonpartisan legislative analysts estimate that state finances face a built-in hole of $1.07 billion in the first budget after the election — based on Malloy’s plan. And the committee proposal only would increase that future deficit.

Plugging holes in the governor’s budget

Appropriations Committee leaders were worried they might not finish on time when they learned from nonpartisan analysts last week about the shortfall in the budget proposal Malloy submitted to them in February.

The governor had reported that his plan was designed to run a $22 million surplus and fall $8 million under the constitutional spending cap.

But the nonpartisan Office of Fiscal Analysis said Malloy’s proposal failed to include $51 million that Comptroller Kevin P. Lembo noted in October was needed to cover surging retiree health care costs.

A second major problem, according to OFA, is that the governor’s budget provides $18.8 million less than what’s necessary to fund the magnet school programs within it. And that shouldn’t come as a surprise, since magnet school funding has fallen almost $19 million short in the current budget.

Smaller spending and revenue adjustments account for the remaining $22 million difference between the governor’s budget and the OFA analysis.

Put all this together, and Malloy’s plan actually was about $70 million in deficit and more than $60 million above the spending cap limit.

So how did the Appropriations Committee bring its plan in a paper-thin $700,000 under the cap while recommending more spending than Malloy had sought?

‘Carrying forward’ the surplus

For one thing, the committee took advantage of a state budgeting technique commonly referred to as a “carry forward.”

The committee would take unused Medicaid funds from this year’s budget and allow them to “carry forward” into next year’s budget. But because they originally were appropriated in 2013-14, they count against that year’s budget for purposes of the spending cap, and not against the 2014-15 budget.

But those roughly $60 million worth of carry forwards now mean this year’s $505 million projected surplus will drop by a matching amount.

Malloy had proposed using $155 million of that surplus to pay for his tax rebate program. The governor also recommended using another $100 million for a supplemental payment into the cash-starved state employee pension fund and depositing the remaining $250 million into the state’s emergency budget reserve.

“We appreciate that members of the Appropriations Committee worked hard to develop a budget that respects the governor’s top priorities while laying out important priorities of their own,” Malloy’s budget chief, Benjamin Barnes, said. “They were deliberate and thoughtful in balancing the many competing needs of our citizens, while remaining under the spending cap.”

Barnes added, “Of course there are some differences with what the governor proposed in February — that’s natural. But we expect to be able to negotiate an agreement quickly.”

Mental health and child welfare programs

The committee also bought itself some additional room under the cap by transferring just under $10 million in grants to private-nonprofit providers of mental health services outside of the budget. These grants now will be paid for out of a special state fund supported by a 1998 legal settlement with five big tobacco manufacturers.

The $10 million would partially offset $25.5 million in previously adopted cuts to grants paid to mental health and substance abuse treatment providers. The grants are intended to cover the cost of treating people without insurance, and the Malloy administration has argued that the state funding wouldn’t be needed anymore since more clients will have health care coverage because of the federal health law. But an analysis this month by the state Department of Mental Health and Addiction Services suggested that the administration’s assumptions aren’t being realized, and that some mental health providers, particularly those that run outpatient clinics, would be left with major shortfalls if the cuts go through.

In addition to reversing $10 million of the grant cuts, the committee’s proposal would increase the Medicaid rates paid for outpatient mental health and substance abuse services, at a cost of $5.5 million.

The recommended budget does not provide additional funding for the Department of Children and Families to hire additional social workers, a concern the federally appointed court monitor over the agency has frequently raised. The proposal actually further reduces by $800,000 the $6.8 million the governor proposed the agency responsible for abused and neglected children save by not filling vacant positions when people retire or leave their jobs.

The committee’s budget follows the governor’s approach of raiding most of the savings DCF has achieved through the reduced use of costly group homes and out-of-state care. Instead, the agency has focused on keeping more children with their families when possible or in foster homes with necessary support services such as therapy. Some advocates for children have been expressing concerns that the department has not been able to keep enough of its savings to provide these community-based services. The agency’s budget has shrunk by 15 percent over the last few years.

The recommended budget would provide $2.5 million to help house hundreds of homeless adolescents. This would be the first time state money was earmarked for housing and support services for children living on their own. Part of the funding for this new program would be paid for by transferring $1.5 million from a program for abused and neglected children who age out of state custody and need rental assistance and help enrolling for other support such as food stamps and health insurance.

A controversial locked facility for juvenile girls who break the law also is fully funded at the governor’s recommended level.

Developmental disabilities and long-term care

Families of people with developmental disabilities have been vocal in recent months about what they consider a lack of state funding for services. Parents of adults with developmental disabilities say they’ve been told that their children won’t receive any state help with housing until their parents die.

There are currently 635 people with developmental disabilities on a waiting list for residential services from the state Department of Developmental Services, including 110 considered “priority one” whose caregivers are 70 or older and 99 whose caregivers are ages 60 to 69.

The committee’s proposal would add $4.4 million to provide residential services to 100 people with developmental disabilities whose parents or caregivers are 70 or older.

The proposal also includes $750,000 in family support grants — cash subsidies for families of people with developmental disabilities to defray extraordinary disability-related expenses such as in-home supports, nursing or transportation. The committee estimates that the additional funding could provide grants to 440 families.

One source of savings the committee proposed comes from cutting the anticipated wage increases for personal care attendants who provide services to people with disabilities, and whose union is negotiating its first contract with the state. Malloy’s budget included nearly $3.5 million to cover an anticipated wage increase for the attendants. The committee reduced the amount of money available for wage increases to $2 million. The attendants gained the right to unionize following a contentious process that began with an executive order by Malloy in 2011.

The committee’s proposal also included $850,000 for 17 new positions at the state Department of Social Services to process long-term care applications. Advocates say people who apply for home care coverage from programs administered by the department often have to wait months for their applications to be processed, leaving them in potentially dangerous situations without assistance.

Providers of home- and community-based services would also get a $3.25 million funding boost under the proposal, to be used for a 1 percent cost-of-living increase.

Sexual violence prevention efforts would get an additional $200,000 under the proposal, including $25,000 to be used for prevention work at state colleges and universities. The other $175,000 would fund direct services for rape and other sexual assault victims, as well as prevention activities.

School funding, school choice and teacher evaluations

The budget also provides municipalities with an additional $7.5 million on top of the $41 million increase Malloy proposed to help cities and towns cover their education-related expenses, which means districts would see their state funding increase by 3.1 percent for the primary state education grant.

The additional increase will largely be directed to the state’s nine lowest-performing districts — $5.6 million would go to Bridgeport, East Hartford, Hartford, Meriden, New Britain, New Haven, Norwich, Waterbury and Windham. The governor had proposed backing off a new funding formula lawmakers created last year to ensure state funding is directed to municipalities with less ability to raise revenue locally, high concentrations of poverty and a higher number of high-need students who typically cost more to educate.

The governor’s budget office estimated in September what towns would get for the fiscal year that begins July 1. The Appropriations Committee budget provides the additional $1.1 million the administration told 55 municipalities they should expect to receive on top of what the formula actually dictates they receive when factoring in poverty and need.

The Appropriations Committee budget also specifically earmarks another $500,000 for West Hartford for education, the town the co-chairs of the Appropriations and Education committees represent. During a public hearing on the education grant, legislators were told that towns like West Hartford, Stamford and Norwalk are disadvantaged by the formula since those towns have higher levels of town wealth (median income) but also have much higher rates of children with special needs.

The committee budget also punted on providing the nearly $19 million the education commissioner recently told committee members is needed to cover  the current interdistrict magnet schools’ costs for next year. By capping magnet school funding, the committee also decided not to provide the $30 million needed to increase enrollment at 10 magnet schools that have already opened and that the state spent millions to build. Typically, when a new magnet schools opens, the state phases in funding for enrollment growth by opening a new grade or two each year until the school is at capacity. The 10 magnet schools that had been set to increase enrollment before this budget were in the Bridgeport, Hartford and Windham regions. Malloy’s proposal also did not fund the magnet expenses.

Funding for the state to help districts implement the state-mandated teacher evaluations and provide supports for teachers identified as struggling to improve is cut by $4 million from what Malloy recommended. The state is expected to spend $10 million this school year, but amid teacher pushback on what many called a poor rollout the governor recommended boosting funding by $3.5 for the coming year. A state panel recently provided districts with the ability to scale back what was required in the guidelines, including conducting fewer observations of teachers each year and less paperwork.

“To reflect changes in the new teacher evaluation system” the budget recommends cutting funding from this year’s spending by $500,000.

The budget fully funds a legal agreement made by the state to help integrate Hartford’s largely minority schools.

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