The leaders of the legislature’s Democratic majority Monday recommended suspending the state’s public-financing of elections for 2016, cutting social services, and retreating from two major initiatives on transportation and municipal aid.
The suggested cuts are part of continuing negotiations with Gov. Dannel P. Malloy, a Democrat, and the Republican legislative minority over how to eliminate growing deficits projected for this fiscal year and the one that begins July 1.
Senate President Martin M. Looney, D-New Haven, said a lack of support for an early-retirement proposal — Malloy and House Speaker J. Brendan Sharkey are opposed — prompted legislators to counter with the unprecedented suspension of a high-profile campaign finance reform created in 2005.
Public-financing advocates pledged opposition to a temporary suspension that they fear would become permanent, ending Connecticut’s status as one of few states with a comprehensive system of publicly financing state campaigns.
“We will do anything and everything we can to stop this,” said Tom Swan, the executive director of the Connecticut Citizen Action Group. “We know we will not support any candidate that would vote in favor of this proposal.”
ConnPIRG and two national watchdog groups, Common Cause and the Every Voice Center, joined CCAG in denouncing the proposal.
“This is an outrageous move announced by a small group of Democrats who apparently believe that the Connecticut public wants more wealthy special interest money in politics,” said Nick Nyhart, a former Democratic activist from Connecticut who now is president of Every Voice.
Looney said suspension, which would save $11.7 million, would not necessarily mean the end of public financing.
“I think there is a general sense we want it to come back for the ’18 cycle,” Looney said.
Republican lawmakers proposed offering incentives to senior workers already eligible to retire, arguing it could save Connecticut $80 million this fiscal year.
Such programs are controversial because, while they give relief to salary accounts, they weaken pension funds over the long haul. Sharkey expressed such concerns about this proposal last week.
Besides cutting several longstanding Democratic priorities, the majority party’s proposal also would: require the Malloy administration to achieve nearly $90 million in new efficiencies, cut funds for the Judicial Branch, public safety, the prison system, and a wide array of culture and tourism programs, and also draw $35 million from the state’s modest emergency budget reserve.
The reductions also would enable the legislature to close this year’s shortfall, restore a portion of the emergency cuts Malloy ordered in September to hospitals and offer modest tax relief to businesses.
These cuts “represent a preservation of our Democratic priorities, to maintain critical services and protect our most vulnerable residents,” Looney said. “In addressing the projected revenue shortfall, our plan continues to make essential investments in education funding, mental health and developmental disability services and municipal aid, including real property tax relief for Connecticut residents.”
“Our plan makes the spending cuts necessary to bring the budget back in balance, and also begins to make some long-term structural reforms, such as improving the business tax climate,” House Speaker J. Brendan Sharkey, D-Hamden, said. “At the same time we sustain the critical services thousands of families depend upon each day, and preserve the much needed property tax relief provided in the original budget.”
The Democratic plans come one business day after fiscal analysts for the legislative and executive branches dramatically increased deficit forecasts for each of the next two fiscal years, while also confirming a shortfall in the current budget.
The legislature’s nonpartisan Office of Fiscal Analysis is projecting a $254 million deficit this year. More importantly, nonpartisan analysts say there is a $552 million shortfall in the 2016-17 fiscal year and a $1.72 billion gap in 2017-18 — the first new budget after the 2016 state elections.
Malloy and Republican legislative leaders unveiled their respective deficit-mitigation plans last week.
The administration was cautious in its initial comment on the Democratic plan.
“We are going to be reviewing it closely and circling the areas where there is overlapping agreement,” Malloy spokesman Devon Puglia said. “We look forward to productive discussions going forward.”
House Minority Leader Themis Klarides, R-Derby, wrote in a statement that “we are in the process of thoroughly evaluating the Democratic deficit-mitigation plan. There are a number of areas where this is similar to the Republican proposal that we presented last week, which is encouraging. It appears to recognize that there are necessary cuts in spending that have to be made.”
Cutting Democratic priorities
Faced with growing red ink, Democrats proposed reductions in areas they traditionally have avoided.
Almost $24 million would be cut from the Office of Early Childhood and the departments of Social Services, Mental Health and Addiction Services, Public Health, and Children and Families.
Similarly, the Democratic majority carved $16.3 million from the Department of Education. Funding for magnet schools would be cut by $6 million and charter schools by $2.3 million. Another $1.4 million that goes to suburban schools that enroll students from Hartford, Bridgeport and New Haven through the Open Choice program would be cut.
The cuts to Open Choice and charter schools are possible because fewer students participated in those programs than the budget had provided funding for this school year. It’s unclear how the $6 million cut to magnet schools will impact those schools, since the education department has not identified that as an area that enrolled fewer students than anticipated. In fact, funding for magnet schools historically has gone over the allocated amount once the state pays for transportation of magnet students.
The vocational-technical high school system operated by the state would be cut by another $6.7 million this year – a 4 percent cut for the current fiscal year.
Another $9.5 million would be cut from the University of Connecticut and the UConn Health Center, and $2.6 million would be cut from the Board of Regents for Higher Education, which oversees the state’s four regional universities and 12 community colleges. State-funded financial aid would be cut by $400,000.
Nearly $3 million would be cut from job training and other programs at the Department of Labor.
“Although there are no easy solutions, this proposal is a balanced approach that respects our priorities while recognizing our current fiscal realities,” House Majority Leader Joe Aresimowicz, D-Berlin, said.
The Democratic plan also cuts $359,000 from the state’s watchdog agencies, including the Office of State Ethics, the State Elections Enforcement Commission and the Freedom of Information Commission.
Looney said Democrats tried to avoid cutting too deeply into any key areas.
“There was much more support for more of an across-the-board approach, where just about everything was nicked to some degree but not to bleed too profusely,” he said.
Still, Democratic lawmakers used a very light touch when it came to the $68.5 million management budget for the legislature, recommending a trim of $979,614, or just 1.4 percent.
Threatening new plans for transportation, municipal aid
Democrats proposed cuts to two of the biggest initiatives from the budget the legislature adopted back in June — but they left open a dwindling hope that these reductions could be averted later.
Specifically, Democrats voted to delay new transfers of sales tax receipts into programs for transportation and for municipal aid.
A five-year ramp up of transportation spending is Malloy’s new initiative, and the Democratic plan delays $35 million in sales tax funds owed this fiscal year to the transportation program.
It’s still possible the state could catch up on its transfer schedule next fiscal year or in 2017-18. But with deficits of $552 million next fiscal year and $1.72 billion looming the year after that, lawmakers will be hard pressed to restore those funds.
More importantly, the Democratic cut would push the Special Transportation Fund into deficit this fiscal year.
Similarly, Democratic legislators’ big initiative in this new budget involves using sales tax receipts to bolster municipal aid. The state is supposed to begin setting aside now some of the sales tax money owed to towns, though most won’t be delivered until next fiscal year — after the next state election.
The Democratic plan would delay payments this fiscal year into the revenue-sharing program by $17.6 million
And again, the looming deficits for the next two years threaten the legislature’s ability to catch up on this delayed transfer in the future.
Putting money back into hospitals
Many legislators have criticized the $63.5 million cut to hospitals Malloy made in September, and the Democrats’ plan would partially reverse it, lowering the cut to $30 million. The hospital payments generate federal matching funds, so the actual hit to hospitals from the governor’s September cut was $192 million. The documents Democrats released Monday didn’t specify how the hospital money would be allocated, but refer to providing funding for community hospitals, and say the restoration would total $102 million once federal funds are included.
The Republican proposal released last week did not call for any funding cuts to hospitals. The money at issue is used to reimburse hospitals for taxes they pay the state; by taxing hospitals and redistributing the money to the industry, the state can capture federal dollars.
Social service funding
The Democrats’ plan also avoids many of the controversial cuts Malloy made in September to programs serving people with developmental disabilities and grants for mental health and addiction treatment providers. Instead, the legislators are seeking $5 million in savings from “efficiencies” at the six institutional facilities the state runs for people with intellectual or developmental disabilities – Southbury Training School and five regional centers. The facilities had 468 residents as of June and have come under fire from advocates who say they are inefficiently run and drain money that could otherwise be used to provide services to more people in the community.
Republican legislators also called for savings through efficiencies at Southbury Training School, proposing $5 million in spending reductions for this fiscal year and $7.5 million next year.
Democrats called for $5.1 million in cuts to the Department of Mental Health and Addiction Services, including more than $1 million in employee costs and $459,556 from the agency’s managed service system, which provides treatment and other supports.
Malloy last week gave legislators budget cut proposals totaling $10 million from the mental health and addiction services department, which would come on top of the $8.4 million in cuts to the department that he made in September. Republicans did not include any mental health cuts in their proposal.
Finding common ground
The Democratic plan does share considerable common ground with plans offered by Malloy, by the GOP, or both.
The Democrats endorsed proposals to cut $21 million from the Judicial Branch and require it to take some juvenile justice programs from DCF into the judicial Court Support Division.
Though the Democratic plan doesn’t include the closure of one state police barracks, as the governor’s did, it did cut $3 million from public safety programs, focusing largely on cuts to training programs for local firefighters.
Democrats also embraced a Republican proposal to save $10 million through greater restrictions on state employee overtime.
And almost $1.4 million would be saved under the Democratic plan by trimming grants to a wide variety of cultural and tourism programs including the statewide tourism marketing program and grants to performing arts centers, museums, regional tourism districts, aquariums and zoos, and historical attractions.
Like the GOP and the governor, Democratic leaders did offer some modest tax cuts.
A cap on the new unitary reporting system within the corporation tax would save companies $7.5 million and another would save businesses $1.3 million through the raising of a cap on corporation tax credits.
But — unlike the competing proposals — much of the Democrats’ proposed tax breaks would be offset by other changes to the corporation tax that would cost firms $6.2 million.
Tapping the Rainy Day Fund, avoiding retirement incentives
Unlike competing proposals from Malloy and from the Republican minority, the Democratic plan does tap into the emergency budget reserve, commonly known as the Rainy Day Fund.
It specifically takes $35 million from the $406 million in the reserve to help close this fiscal year’s deficit.
That move is likely to prove very controversial given the much larger deficits projected for the near future, as well as the relatively small size of the Rainy Day Fund. The $406 million currently deposited is equal to less than 3 percent of annual operating costs. State law allows Connecticut to reserve an amount equal to up to 15 percent.