State Comptroller Kevin P. Lembo distanced himself Thursday from Gov. Dannel P. Malloy, calling his fellow Democrat’s emergency budget cuts premature and warning they could harm the state’s economy.
“Spending cuts may be warranted – but the economic impact of cuts, in this case mostly affecting hospitals, their most vulnerable patients and surrounding communities, may warrant a brief pause until after the state reaches its non-partisan consensus revenue forecast,” Lembo said.
Lembo, who was elected to two terms on statewide Democratic tickets led by Malloy, used his monthly budget report to respond to $102.8 million in cuts Malloy made two weeks ago. His unusual comments reflect the significant reservations among Democrats about the governor’s action.
Malloy irked Democratic legislative leaders and many rank-and-file lawmakers by focusing most of his cuts on hospitals and social services for the poor and disabled – all areas that the Democratic majority battled to spare from deep cuts when the new state budget was enacted in late June.
Benjamin Barnes, the administration’s top budget official as the secretary of policy and management, defended the cuts and suggested that critics perhaps were looking for a politically easier path.
“While are glad to see that Comptroller Lembo agrees with us that the budget should be in balance, the fact is that delaying difficult choices only makes budgeting – for everyone – more difficult,” Barnes said. “Responsible governance requires difficult choices so that Connecticut can move forward. We are making those tough decisions when we must, not shirking our responsibilities for political convenience.”
House Speaker J. Brendan Sharkey seized on Lembo’s report to once again reject calls by Republicans and some in his own caucus for a special session on the budget, while also reiterating his own disagreement with the governor’s action.
“The latest projections from Comptroller Lembo make clear that while fluctuations on Wall Street have made prudent budget reductions a useful tool, we are not in crisis and a special session is not necessary and would be counter productive,” Sharkey said.
He said he would work with the Senate Democratic leadership to identify cuts that would restore funding to local hospitals.
Senate Minority Leader Len Fasano, R-North Haven, took issue with Malloy’s cuts, Sharkey’s refusal to call a special sesion and Lembo’s insistence there is no need for immediate action.
“The governor’s cuts will be devastating for people in our state, threatening health care access and services that help the neediest,” Fasano said. “The comptroller sees that as a reason to ‘pause’ and put everything on hold. I see it as a reason to take action. The budget is a mess. Untouched, the problems we face today will cause more harm down the road.”
The governor has broad discretion under state law to reduce spending in limited amounts without legislative approval. There is no specific threat level that must be met. Rather the administration can order these rescissions, the statute reads, whenever “the governor determines that due to a change in circumstances since the budget was adopted certain reductions should be made.”
Barnes said the cuts were ordered in response to weaker-than-anticipated state income tax receipts, particularly those tied to capital gains, dividends and other investment earnings.
Barnes pointed to the S&P 500, a stock market index based on 500 of the largest companies on the New York Stock Exchange or the NASDAQ market. The stock market, as measured on the S&P 500, peaked on May 21 and has fallen 6.4 percent since.
“We don’t believe there is a reservoir of (potential capital) gains that are commensurate with the past” in Connecticut’s immediate economic future, Barnes said when announcing the cuts two weeks ago. And while investment-related income tax receipts are volatile, “we see a downward trend.”
But Lembo noted Wednesday that the fiscal year, which began July 1, was just shy of three months old when the governor ordered the cuts, adding that Malloy should perhaps have waited until after state analysts release their next official revenue forecast on Nov. 10.
The comptroller also noted that Malloy largely bucked recent budget trends in ordering rescissions when he did. The Democratic governor had not ordered rescissions in September during his first four-year term.
“Past practice has been to delay implementation of rescissions until late November – when a clearer picture of revenue receipts emerges through the consensus forecast,” Lembo added. “I understand the desire to avoid reacting too late and again ending the year in deficit. However, this must be weighed against implementing large cuts to critical programs serving state residents, which may also have an adverse impact on Connecticut’s economy as it finally begins to gain traction.”
The last time rescissions had been ordered this soon also had been a source of extreme controversy.
In 2001 and 2002, Republican Gov. John G. Rowland had ordered cutbacks during the first quarter of the fiscal year. And while Rowland had argued those cuts were necessary given signs the economy was weakening, Democratic legislative leaders argued it was unnecessary and actually a gubernatorial effort to remake the budget more in lines with Rowland’s fiscal policies.