Malloy orders more cuts as lawmakers vow to close deficit by April 1

Gov. Dannel P. Malloy speaks to reporters as advocates argue to shield hospitals from budget cuts.

Keith M. Phaneuf / CTMirror.org

Gov. Dannel P. Malloy speaks to reporters as advocates argue to shield hospitals from budget cuts.

While legislators committed Wednesday to close a $220 million hole in state finances by March 31, Gov. Dannel P. Malloy ordered $79 million in emergency cuts, two-thirds of which hit social service agencies and education.

Malloy, who already had ordered rescissions twice this year, said Wednesday that he again had little room to maneuver fiscally.

“These were difficult decisions, but ones that nevertheless have to be made to ensure that we don’t spend more than we actually have,” the governor said. “I appreciate our recent discussions with legislative leadership, and hope they will continue to be productive and lead to a bipartisan solution. Together, we must adjust our overall spending expectations. I look forward to continuing to meet with Democratic and Republican leadership in both chambers in order to find the best solutions possible.”

State law gives the governor limited authority to reduce spending without legislative approval. The governor cannot reduce any line item unilaterally by more than 5 percent, and municipal aid is exempt.

Other areas, such as state employee salaries and benefits and Medicaid, technically are eligible for rescissions, but in reality they are very difficult to cut mid-year. Wages and benefits largely are fixed by contract while Medicaid, governed by federal entitlement rules, require the state to spend whatever is necessary to serve all qualifying patients.

Because of those limitations, most of these unilateral cuts traditionally fall on social services, public colleges and universities, and some primary and secondary education programs.

That was the case again on Wednesday.

The Department on Developmental Disabilities lost $17.2 million, while $19.5 million in further cuts were imposed on five other agencies that provide social services.

Some specific program reductions within those agencies include:

  • $9.7 million for community residential services for people with developmental disabilities and $4.6 million for employment and day services for people with developmental disabilities.
  • $1.9 million in grants for mental health and substance abuse treatment providers.
  • $829,415 from general assistance managed care, which covers behavioral health services for state residents. The Malloy administration excluded this account from across-the-board cuts in its proposed budget for the upcoming fiscal year.
  • $234,949 from school-based health clinics, which provide primary care, mental health and dental services to students.

The new cuts do not affect the payments the state owes hospitals, which the Malloy administration has been withholding. A spokesman for the governor’s budget office said those funds are still suspended.

Hospitals staged a major lobbying effort at the state Capitol Wednesday, with groups of hospital officials, staffers in scrubs and white coats, and community members walking through the building and urging legislators to make the payments and reduce hospitals’ tax burden. The payments are meant to repay the hospitals for a portion of the $566.1 million they pay the state in taxes – redistributing the money allows the state to generate federal matching dollars – as well as fund a separate pool for small independent hospitals. Legislators from both parties have called for the administration to release the payments.

But Wednesday's cuts do include $1.4 million in reduced payments to community health centers, which the administration announced earlier this month it was withholding. The state funding is used to generate federal matching funds, so the actual loss to health centers is expected to be closer to $4 million. The funding, known as supplemental payments, has in past years supported health center operations and helped to cover costs related to treating the uninsured or shortfalls in Medicaid funding.

Education again took a significant hit.

The University of Connecticut, including the UConn Health Center in Farmington, lost $5.4 million, while the governor also cut $1.9 million from the Board of Regents for Higher Education.

About $6.2 million was cut from the Department of Education, including $1 million from charter schools.

And because some of the social services- and health care-related cuts affected programs that qualify for federal reimbursement, the administration estimated that Connecticut would lose some funds from Washington, D.C. According to Malloy, the $79 million in cuts should produce about $65 million in net savings.

Neither Democratic nor Republican legislative leaders said after a 20-minute, closed-door meeting precisely how they would help Malloy balance the current fiscal year — which ends June 30.

But all agreed they must move quickly because a much larger challenge looms. The preliminary $20.4 billion budget for the fiscal year that starts July 1 has a $900 million general fund deficit — a gap of about 5 percent — and officials hope to resolve that before the regular legislative session ends on May 4.

State officials have been struggling with red ink for much of this fiscal year, a problem driven largely by shrinking projections for state income tax receipts and other revenues.

“We’re all committed to (re-balancing the budget) by the end of the month,” House Minority Leader Themis Klarides, R-Derby said. “We want to do it as soon as possible.”

The House and Senate Republican caucuses offered their own plan Tuesday to wipe out $220 million in red ink this fiscal year.

The GOP plan would:

  • Reduce spending by about 15 percent for higher education and many social services agencies.
  • Cut charter school funding by $12.9 million.
  • Furlough all state workers for two days. This couldn’t be done without approval of state employee unions.
  • Reduce legislators’ pay;
  • Eliminate two high-ranking posts in Malloy’s administration;
  • Cancel a $24 million deposit into the sales tax revenue-sharing program for cities and towns.
  • And allow the state to release $140 million in suspended payments owed to Connecticut’s hospitals.

The House and Senate Democratic caucuses are working on their own deficit-mitigation plan, and leaders said it should be completed by the end of this week.

The Republican plan also sweeps about $40 million from off-budget and other one-time sources. House Speaker J. Brendan Sharkey, D-Hamden, said Democrats probably would turn to some one-time budget solutions as well.

Where exactly will Democrats look to cut?

Sharkey said no ideas have been taken off the table at this point. “We’re trying to gather as much information as we can” and take “a more surgical approach” to cutting the budget than broad, across-the-board reductions, he added.

Senate President Pro Tem Martin M. Looney, D-New Haven, said tentative plans call for House and Senate votes on a deficit-mitigation bill during the week that begins March 28.

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